I have attached what I have so far. Please tweak/correct as needed. Thank you!

**Scenario**

You are currently a financial analyst within Blue Butterfly Company, a small family owned corporation that manufactures magnetic bookmarks. Blue Butterfly management would like to provide a contributory pension plan for five current members of the management team. Management believes they can afford to invest $10,000 per month for the next 10 years. They anticipate the rate of return will be 8%. At the end of the 10 years, they expect retiring employees to start withdrawing from this pension plan. The anticipated longevity after retirement is expected to be 20 years, and management believes the rate of return on the investment to continue through the 20 years of retirement payout. Management has requested your assistance in determining relevant values so they can finalize the components of the pension plan.

**Instructions**

Using Excel, develop a **spreadsheet presentation** that covers the following:

- Explain the concept of the time value of money, including the present and future value of $1, and present and future value of an annuity. Explain the difference between the annuity payment at the beginning and the end of the period.
- Demonstrating the future value of the monthly cash investments for the next 10 years given the investment earns the projected 8% annual return.
- In Excel, calculate the total monthly payment that can be withdrawn from the investment over 20 years given the anticipated 8% annual rate of return continues to be met through the 20 years of retirement. Provide management the monthly payment amount that will be available to payout in monthly pension amounts.
- Assuming all five members of management will receive the same monthly annuity payment, provide management the proposed monthly retirement payment that can be offered to these five members of management.
- Use the built-in cash flow functions in Excel to perform all calculations, explaining in the adjacent cells the values you entered the function.

## Explanations

Money is worth more now than it will be at a later period due to the possibility for profits in the interim. This is a fundamental financial principle. The present discounted value of money is another term for the time value of money. |

The present value formula is PV=FV/(1+i)n, where you divide the future value FV by a factor of 1 + i for each period between present and future dates. Input these numbers in the present value calculator for the PV calculation: The future value sum FV. Number of time periods (years) t, which is n in the formula. The amount to which $1 grows at compound interest for a particular number of years at a specified interest rate is called the Future Value of $1. |

For annuities, the amount of money that must be invested in order to accomplish a given future goal is referred to as present value. The cash amount that will accrue over time when that quantity is invested is called future value. The amount you must invest in order to obtain the future worth is known as the present value. |

An annuity due is one whose payment is due right away at the start of each term. Rent is a good example of an annuity due payment since landlords often expect payment at the start of each month rather than collecting it after the tenant has used the flat for a month. Payments are made at the conclusion of each period in traditional annuities. When annuities are due, they are paid at the start of the period. The entire worth of payments at a certain moment in time is the future value of an annuity. The present value is the amount of money needed right now to make those future payments. |

provide the explanation breakeven points and the lack of explanation of the process breakeven |

provide the explanation step by step all estimates fixed costs including equipment, rent, insurance |

calculates the breakeven point and identifies required sales revenue to reach breakeven – Your reasoning is sound, well done but I found some weakness in your explanation and I have attached my support how you can improve |

How you do breakeven analysis with all steps and components: Part 1: Determining Costs and Prices Part 2: Calculating Contribution Margin and Break-Even Point Part 3: Calculating Profits and Losses See this web for more information and how you should develop this part of competence: How to Do Break Even Analysis: 9 Steps (with Pictures) – wikiHow The pro forma income statement is based on the most recent income statement of the business, which is usually the financial statements of the last period. |

## Calculations

0 | Starting Amount | retiring employees after 10 years | ||

10 | # of years | 20 year longevity | ||

10,000.00 | Monthly | |||

8% | rate of return compounded annually | |||

Total Invesment Amount | $ 1,200,000.00 | |||

0.463193 | Present Value of $1 | |||

6.710081 | Present Value of an Annuity of $1 | |||

$805,209.77 | PV | Rate of 8% with 10,000 paid monthly for 10 years) | ||

$1,738,387.50 | FV | Rate of 8% with 10,000 paid monthly for 10 years) | ||

$ 1,200,000.00 | Principal | |||

538387.5 | Interest | |||

Monthly Payment Amount for 5 management team members | ||||

PV (Present Value) | $805,209.77 | |||

N (Number of Periods) | 10 | |||

I/Y (Interest Rate) | 8 | |||

PMT (Periodic Deposit) | $120,000.00 | |||

Starting Amount | $0.00 | |||

Total Periodic Deposits | $1,200,000.00 | |||

Total Interest | $538,387.50 | |||

$347,677.50 | Total payment allowed per person | |||

$11,589.25 | Total payment per person per year if taken over 30 years | |||

$965.77 | Total payment/month to each person if taken over 30 years | |||

$1,738,387.50 | Future value back into if 965.77/mo is paid to 5 people each month for 30 years |

,

Hi Nicole

Good Efforts! You meet competence performance requirements but not yet proficiency or mastery in this topic!

You are not correctly explained the concept of the time value of money, including the present and future value of $1, and present and future value of an annuity. Explain the difference between the annuity payment at the beginning and the end of the period. Second, you are not correctly demonstrated the future value of the monthly cash investments for the next 10 years given the investment earns the projected 8% annual return. Third, you are not correctly calculated the total monthly payment that can be withdrawn from the investment over 20 years given the anticipated 8% annual rate of return continues to be met through the 20 years of retirement. Provide management the monthly payment amount that will be available to payout in monthly pension amounts. Fourth, you are not correctly assumed all five members of management will receive the same monthly annuity payment, provide management the proposed monthly retirement payment that can be offered to these five members of management. Fifth, you are not correctly used the built-in cash flow functions in Excel to perform all calculations, explaining in the adjacent cells the values you entered the function.

**My detailed summary comments are:**

**1) Explanation of Time Value Money contains some significant inaccuracies or omissions. Inaccurate annuity payment calculation Score 2**

You didn’t provide the calculation all steps for discounted cash flow techniques. Your presentation doesn’t include the retirement plan investment for the provided example with all required components in this competency.

**2) Presentation projects rate of return with significant inaccuracies. Score 2**

** **

You didn’t provide the calculation all steps for discounted cash flow techniques. Your presentation doesn’t include the retirement plan investment for the provided example with all required components in this competency.

**3) Presentation projects rate of payout for employees with significant inaccuracies. Score 2**

You didn’t provide the calculation all steps for discounted cash flow techniques. Your presentation doesn’t include the retirement plan investment for the provided example with all required components in this competency.

4) **Presentation projects rate of payout for management with significant inaccuracies Score 2**

1.

Your reasoning is sound, well done but I found some weakness in your explanation and I have attached my support how you can improve all inaccuracies

5) **Some inaccuracies in the excel calculations and or incomplete or inaccurate explanations of values Score 2**

1.

You didn’t provide all correct calculations with the appropriate explanations

Here, more support to improve these deliverables:

**The 4 Essential Elements of a Retirement Plan**

**Set Clearly Defined Goals**

With an increasing life expectancy, it’s no longer enough to simply state, “I want to retire at age 65” as a goal. In order to inspire a well-conceived plan and the will to faithfully execute it, you need a clear vision of your life in retirement.

· Do you plan on actually retiring; or would you like to work in some other field?

· How will you live in retirement?

· Where will you live?

· What would you like to accomplish?

As you get closer to your retirement goal, your vision will become clearer and more focused. Along the way, your retirement goal becomes your investment benchmark, guiding your investment decisions based on where you are in relation to your goal.

Calculate Your Retirement Costs

One of the more popular rules suggests that retirees will need just 70% to 80% of their pre-retirement income to maintain their standard of living. The major flaw with this rule is it doesn’t account for the true cost of aging. In calculating the cost of retirement, the equation has become more difficult due to the new reality of expanding life spans which can also mean higher health care costs. The cost of your retirement needs to factor realistic spending assumptions based on your goals and desired lifestyle with contingencies for health care costs and unexpected expenses.

Once you know the cost or your retirement you can calculate how much you will need at retirement which becomes your accumulation goal.

Long-Term Investment Strategy

Accumulating enough capital to provide lifetime income sufficiency is a daunting task, made more difficult in an environment of low returns on savings and increased stock market volatility. It requires a serious long-term investment strategy with the confidence and discipline to follow it. It starts with a specific [investment objective], which can be stated as the return on investment that must be achieved to meet your capital need.

The next step is to develop a risk profile that will enable you to match your tolerance for risk with a portfolio of investments that can reasonably expect to achieve your objective. This is done by developing an asset allocation plan that mixes different types of investments with varying correlation to one another. Then, through broad diversification within the asset classes, you can manage portfolio volatility and pursue more stable long-term returns.

Tax-Diversification

For decades we have been told that the best way to accumulate capital for retirement is through tax deferred savings vehicles, such as a 401(k) plan or an IRA. Although it still makes sense for accumulating capital, it doesn’t take into account the tax consequences of income withdrawals and its impact on the total spendable income available in retirement. Retirement planning used to be almost entirely about capital accumulation; however, with the possibility of living 30 years or more in retirement, the emphasis is now on [managing your income during retirement]. If your only income source is a 401(k) plan, your income will be taxed as ordinary income. With diversified income sources that include a Roth IRA for tax free income, or a non-qualified investment portfolio for long term capital gains, you can minimize your taxes in retirement which will help make your income last longer.

Pension plans impact the performance of a company in both direct and indirect ways. Directly, **pensions have an influence on a business's financial statements, including the balance sheet**. Companies are often responsible for partially funding pensions by contributing cash.

Pension plans impact the performance of a company in both direct and indirect ways. Directly, pensions have an influence on a business's financial statements, including the balance sheet. Companies are often responsible for partially funding pensions by contributing cash.

**I have attached the valuable links:**

__Which Type of Retirement Plan is Right for You? | The Motley Fool__

__How Do Pension Plans Impact the Performance of a Company? (azcentral.com)__

__The Ten Key Components of a Retirement Plan | Ruedi Wealth Management__

__Evaluating the Financial Performance of Pension Funds (worldbank.org)__

__Can pension plans help the economy? | BenefitsPRO__

__How the stock market impacts on your pension | PensionBee__

The video about the five components of pension expense

__The 5 Components of Pension Expense (for a defined-benefit plan) – Bing video__

Steps for the discounted cash flows: __4 Method on Discounted Cash flows (DCF) Formula Techniques (ibusinessmotivation.com)__

Discounted Cash flow Techniques: __Discounted Cash Flow (DCF) Techniques: Meaning and Types (yourarticlelibrary.com)__