• Project deadline dates are shown on the schedule page.
• Project #1 uses exercises and concepts from homework assignments to build a retirement/savings plan customized. Each student will develop their own personal retirement plan.
• Project #2 is a team project.
• Participation in projects NOT optional because they fulfill requirements for an upper division General Education elective.

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Project #1

Your Personal Retirement Plan (15%)

Project #1 Resources Find out what your life expectancy is: Longevity Game Retirement Presentations: Part I - Basic Approach (4:48) Part II - Determine Total Retirement Capital Needed (12:01) Part III - Saving Strategy (12:43) Part IV - Investment Strategy (13:47)   Note for Fall 2008 - Two short video clip supplements were created and added in the Video Clips/Files folder in Blackboard. These two clips explain the spreadsheet and how to use it for sensitivity analysis. EXCEL spreadsheet template for making calculations (Note: There are a lot of useful notes in the comment boxes on the spreadsheet. Click on squares with red triangles to see comments. Last revised 11/10/06)

 

 

Introduction: Using the time-value-of-money principles taught in the course, you will prepare a preliminary savings and retirement plan for several different scenarios that shows your savings from graduation until retirement and your retirement income. What are important are the assumptions you make about your income, inflation, desired lifestyle after retirement, and planning for contingencies. A PowerPoint Presentation will be used to walk you through the steps of the process. EXCEL spreadsheets will be used for calculations. If you find some helpful web resources, that is great...but using them to do your project for you is not what is expected. The final project will consist of a two-page written report and an EXCEL spreadsheet that shows your basic approach and sensitivity analysis results.

Note: Project #1 satisfies the critical thinking writing requirement for a General Education synthesis course and is, therefore, mandatory. Students who do not complete this project will receive an incomplete grade or a failing grade, at the discretion of the instructor. 15 point reduction (10%) for each day submitted late.

Grading: Based on the following ruberic:

Grade (Range)	Grading Criteria
A (90%-100%) 135-150 points	Followed instructions well (including content and page limitations) Thoughtful analysis with use of gradients or other graduated approach for savings plan Thoughtful development of your own numbers rather than use template numbers Fairly thorough sensitivity analysis Excellent grammar, spelling, and quality of writing.
B (80%-89%) 120-134 points	Basically followed instructions Good analysis that is not hard to follow with own numbers rather than template numbers Good sensitivity analysis.
C (70%-79%) 105-119 points	Followed most instructions Reasonable analysis Meager sensitivity analysis of only a few parameters Mediocre writing
D (60%-69%) 90-104 points	Minimal effort with use of numbers in original template Superficial analysis Very skimpy or missing sensitivity analysis Poor writing skills
F ( 0 -59%) 0-89 points	Did not submit on time or did not follow instructions well Missing major aspects of project Poorly written

Instructions: You will complete and submit the project in several steps.

Step 1 - Longevity Assignment - Review Parts I and II of the Retirement Planning PowerPoint presentation. You will use one of the web resources above to estimate your "longevity". The purpose here is to dramatize your need for income long after you may hope to retire. Determine how long you will work before retirement. You will also estimate your retirement living expenses using todays dollars and the lifestyle you plan to have after retirement. Download and begin modifying the EXCEL spreadsheet above. You will use it for the rest of your project. Feel free to modify it to make improvements you feel are appropriate.

Step 2 - Retirement Income Needed - You will estimate how much you will need to have saved by the date you plan to retire based on time to retirement, inflation, and other assumptions you make.

Step 3 - Retirement Income Adjusted for Pension - Review Part III of the Retirement Planning PowerPoint Presentation. Using your results from Step 2, you will look at two scenarios at least: one with a company pension plan and one without. You can adjust for any pension plans and develop savings plans for your prime working years. You will start with two initial savings plan scenarios:

• Scenario 1 - Based on NO pension from an employer. This scenario assumes you did not work for any one employer long enough to become vested in a pension plan with them. Your retirement income will come entirely from return on your own investments. The backbone of this plan will probably be your 401k plan and roll-overs as you move from one employer to another.
  
• Scenario 2 - This scenario assumes some sort of pension will be included in you calculations. For example, suppose you work for one company the last 25 years of a 35 year worklife. You would have a company retirment pension based on those 25 years of work. Often with a plan like this you are contributing some percentage (up to 5%) of your gross pay toward the plan.

Step 4 - Determine Retirement Assets Needed - Your return on investment after retirement is traditionally conservative because you cannot afford to risk losing your retirement capital.

Step 5 - Your Investment Return Prior to Retirement - Review Part IV of the Estate Planning PowerPoint Presentation. Develop your own investment strategy to achieve your target rate of return for your savings.

Step 6 - Initial Savings Plans - Based on your own values for expenses, n, rate of return on investments after you retire, investment strategy, etc. Calculate how much per month you will need to save to achieve your retirement goal. This results in a uniform series at this point. However, the template provided also gives a gradient as a percentage of income. You obviously would want your savings to increase over time like an arithmetic or geometric gradient. You may need to create a separate column showing your savings to get it to look realistic to you. Remember, you will start with two initial savings plan scenarios:

• Scenario 1 - Based on NO pension from an employer.
• Scenario 2 - This scenario assumes some sort of pension will be included in your calculations.

You will notice that the difference in how much you would have to save can be significant.

Step 7 - Sensitivity Analysis - Now, vary some of your parameters and see what that does to your monthly savings strategy. Examples of the parameters you could consider here are:

• inflation rate
• investment mix
• time until retirement
• anticipated living expenses after retirement (e.g.,various lifestyles), etc.

Make a table to capture your findings. If you wish, replay the Chapter 9 PowerPoint presentation and streaming audio to review sensitivity analysis. Analyze your findings to refine your strategy to be robust against mistaken assumptions.  

Note for Fall 2008 - As already mentioned at the top of the page, two short video clip supplements were created and added in the Video Clips/Files folder in Blackboard. These two clips explain the spreadsheet and how to use it for sensitivity analysis.

Save your EXCEL spreadsheet with the name: egr403_project1excel_yourlastname

Step 8 - Two Page Summary and Analysis - Write a two-page or less summary using MS Word (double spaced) with two sections. Put your name in the top right hand corner of the page.

• In Section 1 (0.5 page in length) state your overall retirement goals and major assumptions (e.g., own home before retirement, work for a major company for 30 years and have a full retirement plan, travel extensively after retirement, etc.)
• In Section 2 (1.5 pages) summarize your findings and final savings plan. Include what you learned from your sensitivity analysis to support what your savings plan will be.
• Save with filename: egr403_project1summary_yourlastname

Step 9 - Submit your written report and spreadsheet via Blackboard in the Submit Homework section

Project #2

Economic Analysis Team Project (15%)

Part 1 - Getting Organized

 

1. Each team will work together to complete an analysis project. The final result will be a PowerPoint presentation that will be shared with the rest of the class. Projects may be used for future classes as a case study resource.

 

2. Each team will let the instructor know who on the the team will be "organizers", "techies", and "summarizers".

 

3. Each team will create two (recommended) or three scenarios they plan to analyze and compare and have them reviewed by the instructor. These scenarios should be posted in each team's "threaded discussion area" on WebCT so all team members can look at them. If you would like to ask the instructor to review your spreadsheet (and PowerPoint) ahead of time, please send them via email as attached files. The earlier the better so your team can be working on the analysis and any suggested changes.

4. Project #2 Proposal Presentations - Each team will prepare a short PowerPoint presentation for the class which will introduce:

• each team member and their role on the team
• the type of project they are undertaking
• the scenarios they plan to evaluate
• resources they plan to use to gather their information.

Proposal PowerPoint presentations will be emailed to the instructor by midnight on the scheduled day sometime prior to the presentation in class.

Examples of scenarios:

Personal Investing: A 25-year old engineer plans to invest 5% of her salary over the next 35 years in her company 401k plan. But, in addition she plans to invest another 5% of her gross salary in either a Roth IRA or I-Bonds. In the Roth IRA she plans to invest half her money in a market index fund and half in a high rated bond fund. Compare the future worth of the Roth IRA and the I-Bonds.

Business Venture: A young engineer with 10 years experience wants to go into business for himself. He has saved $50,000 to fund the start-up of the company and pay his living expenses until the business can provide enough income to live off of. The two ventures he is considering are: (1) Become a consultant for small engineering companies who cannot afford to hire people in his specialty on a full-time basis (estimated revenue: $150/hour and he will find work 25% of the time. All expenses are tax deductable), or (2) Open up a computer sales and repair business in small strip mall. Which option is preferred if the business will probably be sold after 10 years?

Lease vs. Buy: You are considering either buying or leasing a new Toyota Camry. If you purchase, you plan to put $4000 down and finance the rest over 36 months. If you lease, you are planning a 3 year lease. Car will be driven 12000 miles/year. You plan to keep the car for 3 years. Which is the better option.

Equipment Comparison: You are considering buying either a gasoline powered vehicle or a hybrid vehicle. You chose a Toyota Forerunner hybrid vs. gasoline powered vehicle. You drive 15,000 miles/year and expect to keep the vehicle for 5 years then sell it. Vehicle will financed with 20% down payment.

Below are some sample scenarios used by previous groups. Note: Not all examples are good ones! Follow instructions.

Sample 1: Equipment Comparison
Sample 2: Business Venture
Sample 3: Equipment Comparison
Sample 4: Personal Investing
Sample 5: Make vs. Buy Decision

1 2 3 4 5 6 7 8 9 10 11 12 13

Fall 2004 Project Proposals

Fall 2005 Project Proposals

Team 1 Team 2 Team 3 Team 4 Team 5 Team 6 Team 7 Team 8

1 2 3 4 5 6 7 8

Fall 2006 Project Proposals

Team 1 Team 2 Team 3 Team 4 Team 5 Team 6 Team 7 Team 8

1(Make vs. Buy) 2(Toyota vs. Ford) 3(Commute or Not) 4(Honda Engine Choices)
5(Buy vs. Rent) 6(Buy vs. Lease Car) 7(Investment Comparisons)
8(Employed vs. Self-Employed)

Fall 2007 Project Proposals

Team 1 - Invest in low income or high income real estate ppt
Team 2 - Alternative Energy for Housing ppt
Team 3 - Investing in a 401k vs. a house ppt
Team 4 - When to buy a house ppt
Team 5 - Lease vs. buy a car ppt
Team 6 - Buying vs. Building a House ppt
Team 7 - Casting vs. Machining ppt
Team 8 - Refurbish or Replace Computers ppt

Winter 2008 Project Proposals

Team 1 - Alternative Energy for Housing pres
Team 2 - Hybrid vs. Gasoline pres
Team 3 - Repair or Replace Old Computers pres
Team 4 - Lease or Buy a BMW pres
Team 5 - Community College vs. Four-Year University pres
Team 6 - 401k vs. Roth IRA pres
Team 7 - Buy & Rent vs. Save & Buy pres
Team 8 - Bachelors vs. Masters Degree pres

Fall 2008 Project Proposals

Team 1 - 1985 vs. 2005 Honda pres
Team 2 - Honda Civic Hybrid vs. Gasoline pres
Team 3 - Work vs. School pres
Team 4 - 401k vs. Profit Sharing pres
Team 5 - Lease vs. Buy Honda Civic pres
Team 6 - Rent vs. Buy pres
Team 7 - Conventional vs. Solar Powered Business pres
Team 8 - Hybrid vs. Gasoline Tahoe pres

Winter 2009 Project Proposals

Team 1 - Printing In-house vs. Outsourcing pres
Team 2 - Make vs. Buy Computer pres
Team 3 - RV vs. SUV pres
Team 4 - Lease vs. Buy a House pres
Team 5 - East vs. West Coast pres
Team 6 - California vs. Montana pres
Team 7 - Make vs. Buy Computer pres
Team 8 - Public vs. Private College pres

Obviously you will have to do some research and make some assumptions. Your goal is to be able to make a cash flow diagram for each scenario and then perform an economic analysis (e.g., Present Worth, Annual Worth, Rate of Return, Future Worth) to determine which alternative is preferred. The economic analysis includes sensitivity analysis on the major variable factors used in the analysis.

A mid-project team member evaluation will be conducted to assess how well each team is functioning and allow for corrective action if deemed appropriate. Each team member will rate themselves and other team members based on the following ruberic:

Rating	Participation
5	Attends and participates in most, if not all, team activities which includes such things as: team meetings (inside and outside class), discussion boards, email, and chats. Meets obligations and commitments. Contributions are helpful. Shows initiative and leadership in helping the team along. Understands project requirements.
4	Good team member. Attends and participates in most team activities. Generally fulfills role on the team. Contributes as needed, but not necessarily a major leader.
3	Participates in over half of the team activities, but not a major contributor. Fulfills role most of the time. May not be good at responding to email or voicemail messages.
2	Participates in less than half of the team activities. Contributions are minimal or not helpful, or both. Not fulfulling role obligations at a consistent level. Not dependable or communicative.
1	Little or no participation or contribution to the project.

5. Identify Useful Resources - Each team will also search the internet for helpful information and resources. From their findings they will make recommendations of good website(s) for future reference. Using the internet, find one or two websites that relate to the course material and review them. This could include anything to do with interest rates, loans, leasing, retirement, investing strategy, replacement, income taxes, or economic analysis. Present your chosen URL(s) and review comments on the last one or two slides of your PowerPoint presentation.

6. PowerPoint Presentation Tips and Guidelines:

• 8-10 minutes long
• Not more than 6-8 lines per slide
• Use short statements and bullets rather than sentences or paragraphs
• Avoid spending too much time educating the class on all the details of an investment option (e.g., 401k, IRA, etc.). No more that two or three minutes of the entire presentation should be spent on education.
• Keep graphics clear and easy to see
• DO NOT PULL UP AN EXCEL SPREADSHEET AND PROCEED TO SHOW THE CLASS OUR CALCULATIONS (your project immediately falls out of the A grade category if you do that).
• Avoid too much animation
• Plan about one slide per minute (maximum allowed is 12 slides so handouts for each presentation can fit on one sheet of paper). Allow time for people to see what the slide intends to communicate

7. Email completed PowerPoint Presentation AND your team's Excel spreadsheet to Dr. Rosenkrantz by midnight of the day specified on the schedule before presentation day. Each presentation should be 8-10 minutes with at least two members from the team making the presentation. Dr. Rosenkrantz may provide handouts for the class on the day of the presentations. If you want to see what your handouts will look like, print out a set of handouts at 6 slides/page. Note that sometimes exotic background images really mess up handouts.

8. Grading - The team project grade will be based on the following ruberic. Individual grades will be based on the team grade and the level of team participation. A team member evaluation will be conducted during the 24 hours after the presentation:

Grade (Range)	Grading Criteria
A (90-100)	Followed instructions well. Scenarios were well researched and clear. Analysis method was properly chosen and utilized. Presentation was easy to follow and graphics were easy to see. Well thought-out sensitivity analysis. Web resources and presentation were of clear value to the rest of the class.
B (80-89)	Basically followed instructions. Good analysis that is not hard to follow with reasonable assumptions. Good presentation with mostly legible graphics. Good sensitivity analysis. Of some value to part or all of the class.
C (70-79)	Followed most instructions. Reasonable analysis. Meager sensitivity analysis of only a few parameters. Mediocre writing, graphics or presentation.
D (60-69)	Minimal effort with use of trivial or questionable numbers. Superficial or questionable analysis. Very skimpy or missing sensitivity analysis. Poor communication skills.
F ( 0 -59)	Did not submit on time or did not follow instructions well. Missing major aspects of project. Poorly written.