PreCalc Project Scenario #1
hour 5
Scenario
Brent is a construction foreman who did not attend college. He is 24 years old, and earns an annual salary of $50,000. He just purchased a $23,000 car with a 6.50% 5 year car loan. He wants to buy his first home in the next few months.
Net monthly income
After federal income tax: $50,000 - $50,000(.25) = $37,500
Monthly income: $37,500/12 = $3,125
Monthly expenses
Car Payment
In order to find the monthly car payment, I used the present value equation and plugged in the variables to solve for R.
After calculating for R, I found out that the monthly car payment is $450.02
Cell Phone Bill
Food
I chose a moderate food cost plan since Brent is a middle class male who could probably afford more than a low cost plan. He is also young and would consume more food.
Utilities
Gas and Car insurance
An average full coverage car insurance for a 24 year old driver is $325.67
Entertainment
Total monthly budget
Food: $364.08
Utilities: $148.21
Entertainment: $100
Phone bill: $65
Car payment: $450.02
Total monthly expenses: $1,452.98
Budget for house
$3,125 - $1,452.98 = $1672.02
What house can I afford
I used the present value formula to find out how much can I afford for a house.
After solving the equation, I found out that I can spend $359,713.785
Actual monthly payment
It is located in Westbrooke Dr, Overland Park, and has four bedrooms.
The house is 2,022 square feet, but Brent earns enough and always wanted to live in a big house.
I used the present value formula again to find the monthly mortgage payment which will be $952.88
Total house payment
Interest: 343,036.8 - 205,000 = $138,036
Amortization Table
Increasing the monthly payment by 15%
Time to pay off new amount is shown by solving for t in the equation shown.
t= 23 years 7 months
Amount saved: 343,036.8 - (1095.81*12*23.58) = $32966.4