Finacncial Analysis- Portfolio Projection
Age			25
Current Salary			$34,000.00
Current Portfolio			$14,500.00
Annual Salary Growth rate			5%
Annual investment rate			4%
Annual Portfolio Growth Rate			10%
		Begginning		New	Portfolio	Ending
Year	age	Portfolio	Salary	Investment	Earnings	Portfolio
1	25	14,500	34,000	1,360	1,518	17,378
2	26	17,378	35,700	1,428	1,809	20,615
3	27	20,615	37,485	1,499	2,136	24,251
4	28	24,251	39,359	1,574	2,504	28,329
5	29	28,329	41,327	1,653	2,916	32,898

Without considering the random variability in growth rates, extend the worksheet in Figures 16.18 to 30 years. Confirm by using the constant annual salary growth rate and the constant annual portfolio growth rate. Tom can expect to have a 30- year portfolio of $627,937. What would Toms annual investment rate have to increase to in order for his portfolio to reach a 30-year, $1,000,000 goal?

Incorporate the random variability of the annual salary growth rate and the annual portfolio growth rate into a simulation model. Assume that Tom is willing to use the annual investment rate that predicted a 30-year, $1,000,000 portfolio in part 1. Show how to simulate Toms 30-year financial plan. Use results from the simulation model to comment on the uncertainty associated with Tom reaching the 30-year, $1,000,000 goal. Discuss the advantages of repeating the simulation numerous times.

What recommendations do you have for employees with a current profile similar to Toms after seeing the impact of the uncertainty in the annual salary growth rate and the annual portfolio growth rate?

Assume that Tom is willing to consider working 35 years instead of 30 years. What is your assessment of this strategy if Toms goal is to have a portfolio worth $1,000,000?

Discuss how the financial planning model developed for Tom Gifford can be used as a template to develop a financial plan for any of the companys employees.