The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly employees and a $4,000 increase to all software analysts with salaries less than $55,000. However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).
Option 1: How much would he have to invest today in a single lump sum at a 6% annual interest rate compounded quarterly to have sufficient funds to execute his plan?
Option 2: How much would he have to invest in equal monthly payments at a 3% annual interest rate compounded monthly to have sufficient funds to execute his plan?
Part 1: Select the following link to download the Microsoft Excel spreadsheet for this assignment:
Because the CEO wants to increase salaries for all hourly employees and software analysts, there needs to be a count of the employees in each category.
- Create an additional worksheet named “DB Calculations.”
- Set up a criteria range in the first few rows and columns to identify all hourly employees. Use this criteria in the Advanced Filter feature to extract all hourly employees.
- Set up a second criteria range in the columns next to the first to identify the software analysts with salaries less than $55,000. Use this criteria in the Advanced Filter feature to extract all hourly employees.
- In any cell beneath each criteria range, use the DCOUNT function to calculate the number of hourly employees using the first criteria range, and then again to calculate the number of software analysts with salaries less than $55,000.
- Multiply the count of hourly employees by 2,000, and the count of software analysts with salaries less than $55,000 by 4,000. The sum of these two numbers will be the total funding needed to execute the CEO’s plan.
Part 2: Use the funding you calculated in Part 1 and the appropriate compound interest formulas you learned in business algebra to calculate the investment amounts for options 1 and 2. Show your calculations in any empty area on the worksheet created in Part 1.
PV – Returns the present value of a future amount
PMT – Calculates the payment necessary to accumulate a future amount
Compound Interest Formulas:
A = P(1 + i)n
FV = PMT × (1 + i)n – 1