John Barton is both excited and amazed. Excited because on graduating from college one year ago at age 22, he landed a good job with a commercial leasing firm and he is enjoying the work. His company has good benefits and has just given him a raise so that in his next (2nd) year of employment he will be earning $55,000 per year. He is amazed because even with this raise he feels that money is just as scarce as it was when he was a student. The paycheck comes and before he knows it, it is gone again. Certainly he has many more things than he did before: a nice new car, an attractive apartment with some real furniture, and a wide screen television. Nonetheless, he is still concerned that he has little in savings to handle emergencies (becoming ill, terminated from his job) or life changing events like getting married. John feels that it is time to get his finances in order as his father is always saying. He intends to determine his personal Net Worth and to understand where his money comes from and where it goes. He has gathered the following information to help him with this task. His annual salary is $55,000 and in addition he earns $150 per year in dividends on stock that his grandmother left him in her will. The stock was worth $4,200 when he inherited it. A few days ago John checked the stock price on the Internet and saw that it is now worth $6,000. He also earns about $10 per year in interest on a savings account. The current balance in the savings account is $1000 and he has $300 in a checking account. Fifteen percent of his check is withheld for income taxes and another 9% for employment taxes (these tax rates already take into account the 401k pre-tax deduction from income so calculate the taxes using total salary). John must pay $75 per month to obtain health and dental insurance under the company plan. His firm matches money he places in an employee retirement savings plan (401K plan). John has put $1,650 in the plan to date and the company matched it. He intends to continue with this level of contribution in the future. If John leaves the firm prior to five years of service he will not be entitled to the company match. In other words, the money the company has contributed and continues to contribute is not his until he has been with the company for five years. So the balance showing in his 401k account includes only his contributions. John purchased a nice car upon graduation (one year ago) for $25,000 and has maintained it carefully. He noticed that similar used cars of the same year are now selling for $13,000. He makes monthly car payments on a $23,000 loan (the amount he originally borrowed), at 5% annual interest over 60 months. Vehicle maintenance expenses run about $50 per month. Gas costs $147 per month (1,500 miles per month, 25 mpg, $2.45 per gallon) and toll road charges are $25 per month. He pays $2,300 per year for vehicle insurance. His apartment rent is $1,000 per month with natural gas bills of $80 and electricity averaging $70 per month. John carries renters insurance to cover loss of goods in the apartment and liability for accidents; it costs $40 per month. He estimates that he spends $600 per month on food (he eats out a lot), $75 on clothes monthly, and $250 on entertainment each month. He also takes a couple of short vacations through the year that cost in total about $2,000 annually. His home furnishings were previously purchased for $5,000 and are currently worth about $3,000 (market value). In addition, he has a nice entertainment system that is worth $2,500 and personal items (clothes, etc.) of $1,500, which are both at market value. In addition to his auto loan, John has additional debt. John currently has a balance on his credit cards of $3,500 and he has been paying, on average, $100 per month on the account. He owes $20,000 on student loans and makes payments of $250 per month.

Assignment:

1. [6 points] Compute Johns monthly car payments and figure out what the ending principal balance is on the loan at the end of the first year. This requires an amortization schedule of the loan so you can determine the monthly payments and his loan balance at the end of one year. John has made 12 monthly payments so far

2. [12 points] John is interested in calculating his net worth and his cash flows for the year. Complete the worksheets provided for calculating these items. These worksheets are templates and you may not need all items listed/provided. You can leave these blank or delete the lines from the worksheets. *Note: The assets and liabilities get listed on the net worth statement at their current market value (assets) or the current amount due (liabilities). The income and expenses get listed on the cash flow worksheet and should include both monthly and annual amounts for each item included for John.

3. [6 points] Based on your analysis, what is Johns current financial position? Is it sustainable into the future? Prepare your answer with references to the information you found in part 2 (net worth and net cash flow statements). This response should be a typed 1-2 paragraph analysis including Johns: current financial position, current cash flow situation, and 3 5 suggestions for how John could improve his condition moving forward. This should be included as a text box on the cash flow worksheet or a separate Word document.

4. [6 points] Create a monthly (or semester if appropriate) cash budget (cash flow worksheet) for yourself. You can create your own budget in Excel on a new worksheet or copy and use the template provided for the case to a new worksheet.

E A. C 1 Monthly Annual 2 Income Salary 3 4 Bonuses Dividends Capital gains 6 7 Interest Other income 9 Total Cash Infiow 10 11 Expenses 12 Apartment Rent 13 Utilties 14 Gas Electricity 15 Water & Sewer 16 17 Home maintenance 18 Car payments 19 penses 20 21 Maintenances Gas Tolls 22 23 Credit card/loan payments 24 Student loan payment 25 Insurance premiums: Life 26 27 Health 28 29 Car Home 30 Lability 31 Income taxes 32 Employment taxes 33 Clothing 34 Child care 35 Food 36 Medical expenses 37 Vacations 38 Entertainment 39 Charitable contributions 40 Personal items 41 Savings/investment: 42 Emergency 43 44 Other payments Retirement Funds Total Cash Outflows 45 46 47 Net Cash Flow 48 49 50 Mutual funds Other investments Total Investments Retirement Funds IRA's Employee savings plans (401k) Total Retirement Funds Personal Assets Residence Collectibles Automobiles Home furnishings Other assets Total Personal Assets Total Assets Liabilities Charge account balances Personal loans Student loans Auto loans 401(k) loans Home mortgages Other liabilities Total Liabilities Net Worth Principle Balance Payment: Interest Rate: Months: Principal Principal Balance Payment Number ayment Interest E A. C 1 Monthly Annual 2 Income Salary 3 4 Bonuses Dividends Capital gains 6 7 Interest Other income 9 Total Cash Infiow 10 11 Expenses 12 Apartment Rent 13 Utilties 14 Gas Electricity 15 Water & Sewer 16 17 Home maintenance 18 Car payments 19 penses 20 21 Maintenances Gas Tolls 22 23 Credit card/loan payments 24 Student loan payment 25 Insurance premiums: Life 26 27 Health 28 29 Car Home 30 Lability 31 Income taxes 32 Employment taxes 33 Clothing 34 Child care 35 Food 36 Medical expenses 37 Vacations 38 Entertainment 39 Charitable contributions 40 Personal items 41 Savings/investment: 42 Emergency 43 44 Other payments Retirement Funds Total Cash Outflows 45 46 47 Net Cash Flow 48 49 50 Mutual funds Other investments Total Investments Retirement Funds IRA's Employee savings plans (401k) Total Retirement Funds Personal Assets Residence Collectibles Automobiles Home furnishings Other assets Total Personal Assets Total Assets Liabilities Charge account balances Personal loans Student loans Auto loans 401(k) loans Home mortgages Other liabilities Total Liabilities Net Worth Principle Balance Payment: Interest Rate: Months: Principal Principal Balance Payment Number ayment Interest