Scenario: Your manager has tasked you with developing an investment planning model for common stocks based on the following assumptions:

Sales for the current year are $1,000,000.

Net sales are expected to increase by 2% per year for the next 5 years.

Current investments in common stock is $250,000.

Annual investment rate in common stock is 1% of net sales per year for the next 5 years.

Dividends rate is estimated at 8% per year.

you decide to create a simulation model that accounts for the following:

a. Net sales growth rate per year from 1% to 6%

b. Annual portfolio growth rate on average 8% with a standard deviation of 5%

1. Run the simulation model you created one time. What would be the value of the investments in common stock at the end of the 5 years?

2. Based on your answer to the question, what should the annual investment rate need to be if the goal were to reach approximately $500,000 at the end of year 5? HINT: Use Goal Seek.

3. Discuss how the investment planning model you developed can be used as a template to develop other investment models for businesses and individuals alike.