• A detailed and complete analysis for the two problems is required; unnecessary or additional details may be included in the project appendix.
• All documents, including any work conducted on excel spreadsheets should be showed the works.
• The fun project should be typed, not hand-written, and presented professionally.
• Please demonstrate your solution in a simple and easy way to follow. Think of it as a solution/presentation you were asked to provide/deliver to one of your clients, who are financially illiterate.

Question 1. One of my of my students is graduating soon. She accepted a job offer where she will be living away from her family for the next couple of years. She is in the market looking for a new car and she needs your help on whether she would finance or lease her new car. Since she does not know yet if she is going to stay in the new job or not, she wants a short term commitment, let?s say three years.

She is currently looking at the 2016 Toyota Corolla. Based on the Finance and Lease Offers attached and the fact that her opportunity cost is 7%, what is your recommendation? To Finance or Lease? A detailed and complete analysis is required to support your claims.

Here is a list of the things that you have to take in consideration to better analyze this problem:

1. Her credit score qualifies her for the offer.
2. If the car is finance, she has to sell it back to the dealership or to a private-party.
3. If the car was rented, she has to return it to the dealership without worrying about finding someone to buy it.
4. The dealership will buy the car back from her at the Trade-in Value, while the private party will pay the Private Party Value of it. You can find more about Trade-in and Private Party Values in Kelly Blue Book. (Note: use value for a 3-year old (2013) Toyota Corolla for that purpose).
5. Pay attention to the maintenance cost under the Finance and Lease options, as it may change your answer. To get more details how much it costs to maintain the corolla over the 3-year period, go to http://www.edmunds.com/toyota/corolla/2016/sedan/cost-to-own/
6. Finally, assume that she will not drive more miles than what the lease option dictates.

Note: feel free to make any other necessary assumptions to solve this problem. Just do not ignore any of the items list above. For instance, don?t assume that you will drive the car for three full years without maintain it.

Question 2. Congratulation on your graduation and your new job!!! You are now 25 years old trying to plan for your retirement. You decided to start saving as soon as you receive your first paycheck at the end of this month. Your current annual salary is $40,000 and you plan to save 15% of your monthly income after tax. For the first 5 years of your career, you are not expecting any pay rise; however a 3% annual raise is expected until you retire at the age of 65. The following major events in your life should be considered when planning for your retirement:

• In 10 years, from today, you will buy a house for $300,000 financed at 6% for 30 years with 10% down payment. (You will sell the house for $350,000 when you retire.)
• You are expecting to inherit $250,000 in 20 years from your parents.
• Youareplanningongettingmarriedbytheageof30andhavingyourfirstandonlychildbytheageof34.Itisyourresponsibilitytosecurepartofyourdaughter?sfutureaswell.Hence,whensheis18yearsold,shewillneed$30,000(annually)forcollegetuitionand$30,000(annually)forherlivingexpensesforthenextfouryearswhileattendingcollege.Bothtuitionandlivingexpensesareduebythebeginningofeachyear.(Assumethatyourwifedoesnotwork,butyouwillfilefortaxesjointlyaftermarriage.Usethepersonalincometaxschedulespresentedbelowforthatpurpose).

Your full retirement age is 65 and you plan to retire then. You believe that you will live an additional 20 years post-retirement and, by the time you retire, you would like to have the following:

• A monthly income of $4,500 for 20 years.
• $500,000 savings in cash for medical purposes the day you retire. You can continue earning interest on this account.
• A monthly payment for a beachfront house with a value of $1,000,000 financed at 6% for 20 years and 25% down payment.

Your required return is 7% and that is equivalent to what you can earn as a return on your savings. By the time you retire, are you falling short on your retirement savings? What is your shortage or surplus?

Single:

Taxable Income	Tax Rate
$0 to $9,225	10%
$9,226 to $37,450	$922.50 plus 15% of the amount over $9,225
$37,451 to $90,750	$5,156.25 plus 25% of the amount over $37,450
$90,751 to $189,300	$18,481.25 plus 28% of the amount over $90,750
$189,301 to $411,500	$46,075.25 plus 33% of the amount over $189,300
$411,501 to $413,200	$119,401.25 plus 35% of the amount over $411,500
$413,201 or more	$119,996.25 plus 39.6% of the amount over $413,200

Married Filing Jointly or Qualifying Widow(er):

Taxable Income	Tax Rate
$0 to $18,450	10%
$18,451 to $74,900	$1,845.00 plus 15% of the amount over $18,450
$74,901 to $151,200	$10,312.50 plus 25% of the amount over $74,900
$151,201 to $230,450	$29,387.50 plus 28% of the amount over $151,200
$230,451 to $411,500	$51,577.50 plus 33% of the amount over $230,450
$411,501 to $464,850	$111,324.00 plus 35% of the amount over $411,500
$464,851 or more	$129,996.50 plus 39.6% of the amount over $464,850

Note: Assume that tax bracket will remain the same until you retire.

1/23/2016 New Car Deals | Local Toyota Deals, Incentives & Special Offers Toyota.com REGIONAL OFFER DETAILS Corolla Ends 02/01/2016 0% APR Financing for 60 Months on new 2016 Corolla Request a Quote Now! Click Here to Get Offer! Free TradeIn Valuation in Just Seconds! 2015 Toyota Corolla received the NHTSA 5Star Overall Safety Rating** Have you graduated from college in the last two years, or will be doing so in the next six months? If so, you may be eligible for additional College Rebate savings. Click here to learn more! Includes Two Years No Cost Maintenance Plan With Roadside Assistance Click to See All the Benefits of ToyotaCare* Offer Details 0.0% APR Financing for 36 Months $27.78 per $1,000 borrowed OR 0.0% APR Financing for 48 Months $20.83 per $1,000 borrowed OR 0.0% APR Financing for 60 Months $16.67 per $1,000 borrowed. No down payment with approved credit through Toyota Financial Services - Tier 1 Plus and 1 only. Not all customers will qualify for lowest rate. Must take retail delivery from new 2016 dealer stock by 02012016. Subject to availability. Details and qualifications apply. Offers may vary by region. Individual dealer prices and document fees may vary. See participating dealer for details. APR OFFER MAY NOT BE COMBINED WITH CUSTOMER CASH OR LEASE OFFERS. Vehicle image is for display purposes only. *Covers normal factory scheduled service for 2 years or 25,000 miles, whichever comes first. See Toyota dealer for details and exclusions. Valid only in the continental U.S. and Alaska. **Government 5Star Safety Ratings are part of the National Highway Traffic Safety Administration's (NHTSA's) New Car Assessment Program (www.safercar.gov). http://www.toyota.com/localspecials#!#/viewdetails/viewdetails 1/1