To Commute or Not

1
To Commuteor Not

• Team 3 Members
• Andy Funes
• Ta-Lun Huang
• Justin A. Klotz
• Steven Roos

2
In this Presentation

• Commute or Not?
• Locations LA Palmdale
• Short Long term 5yrs, 15yrs, 30yrs
• House, Car, Salary
• Tax, Interest Rate, Inflation Rate
• Cash Flow Diagram
• NPV
• Sensitivity Analysis

3
Setting the Stage

• 30 Years Old Engineer with Experience
• Married with Children
• Medium Size Family House 3 bedroom
• Working Location El Segundo, CA
• Two Living Locations
• Palmdale, 5miles radius of Palmdale Blvd off 14
  freeway ramp
• Los Angles, 15 miles radius of El Segundo Blvd
  off 405 freeway ramp

4
ConsiderationsHouse

• Los Angeles Price 625,000
• Palmdale Price 285,000
• Home Interest Rate 5.76
• Home Appreciation 7
• Down Payment 20
• Appreciation Value
• Mortgage Payment
• Property Tax

5
ConsiderationsCar

• Price Useful Life 5yrs
• Down Payment 20
• Depreciation / Salvage
• Mileage Annual Mileage 3750 vs. 36250
• Interest Rate 6.35
• Payment Maintenance
• Gas MPG Fuel Price

6
ConsiderationsSalary

• Income / Adjusted Income
• Income Tax / Net Income
• Inflation 3
• MARR 10
• Use House, Car, and Salary Info.
• Develop NPV

7
Cash Flow Diagram Example
8
NPV
9
Sensitivity AnalysisExample Appreciation Rate
10
Sensitivity AnalysisExample Maintenance Cost
11
The Conclusion

• LA is the superior choice
• More expensive on an annual basis
• Expenses of
• Living in LA goes to Home Investment
• Living in Palmdale goes to Transportation
• Commute becomes more attractive when gas,
  maintenance are reduced significantly
• Time Value

12
Resource Information

• Zillow http//www.zillow.com
• Kelly Blue Book http//www.kbb.com
• Sigalert http//www.sigalert.com
• Local Bank
• Real Estate Agency