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KEY ASSIGNMENT #2

IE 3312-003
Dr. Shernette Kydd
Due: May 01, 2014













VIHANG PARMAR
UTA ID 1000764011

Debt Destroyer method
As shown in the Income, Debts and Loans tab of the attached spreadsheet, all the debts
were arranged in increasing order of the interest rates to pay off all the debt faster. The interest
rates for the credit cards were chosen arbitrarily in reasonable range. As instructed, 2.5% of the
credit card balance was set as the minimum payment for each of the credit cards. CarMax
Payment Estimator tool was used to calculate the monthly car payments. The Repayment
Estimator tool on studentloans.gov was used to estimate monthly minimum payments for the
student loans debt. Moreover, 10% of the monthly income amount was calculated and set aside
as the debt destroyer amount. For the annual salary of $78000, the debt destroyer amount was
calculated to be $650 each month.
As instructed in the document provided by the instructor, the debt destroyer amount was
targeted to pay off the first debt. After the first debt was paid off, the remaining of the debt
destroyer amount from debt one for the month and the minimum payment of debt one were
targeted to pay off towards the second debt. The debt destroyer and the minimum payment
amount of previous paid off debt were used to pay off the next debt in the line until all debts
were gone.
As shown in the Debt Payoff and Calculation tab of the spread sheet, all the debt was
paid off using the method described above in 47 months. The amount of $1242.05 was left from
the $2226.78 (debt destroyer amount plus the sum of minimum payments for all the loans/debts).
This amount was used to start an investment as a savings account in a bank. A typical APY of
0.05% used by most of the banks was used to do the calculations in the Investment Plan (Money
Machine) tab of the spreadsheet. At the end of 120 months (which is the maximum loan period
among all the debts), this bank account has a balance of $169114.90. Compared to $105.049.59
paid to get rid of all the debts, the investment provides the total savings of $64065.31 in the
savings account at the end of the loan period. More details can be found in the Aftermath tab
of the spreadsheet.
The savings amount of $169114.90 obtained as explained above can be used to make
further investments to run the money machine even faster. Some fraction of this amount can be
used to invest in real estate as well as some portion of the amount can be used to purchase bonds
to earn more interest compared to the savings account.

APPENDIX
Honda Financing calculation










BMW Financing Calculation


Cash Flow Diagrams (refer to the spreadsheet for details)
Initial cash flow

End cash flow


-$3,000.00
-$2,000.00
-$1,000.00
$0.00
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
$7,000.00
1 2 3 4 5 6 7 8 9 10
months (1 to 10)
Start condition cash flow
Outflow
Inflow
-$20,000.00
$0.00
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
$140,000.00
$160,000.00
$180,000.00
$200,000.00
1 2 3 4 5 6 7 8 9 10 11
months (111 to 121)
End condition cash flow
Investme
nt value
Outflow
Inflow