Group members:
David Baldonado
Christian Kouttjie
Henry Phung
Rafael Ruiz
Scenario
Southern California vs. Tennessee

Octavio and his dog, Rex, are saving up $200,000 for a
down payment on a house back home in California.

Housing ~ 850sq ft apartment that accepts dogs

Where should he live?
Options
 Two
job offers are available
 In Los Angeles, CA: $70,000 /year salary,
with a raise of 3% every 2 years
 In Knoxville, TN: $50,000 /year salary,
with a raise of 3% every year
Considerations

Equivalent Distance Commuting Cost –
 LA: $2.26/gal for 20 miles roundtrip
 TN: $1.82/gal for 20 miles roundtrip

Healthcare Costs–
 LA: $4,156/year
 TN: $4,274/year
Dog Cost - $1,525/year
 Rent -$1200 LA and $540 Knoxville
 State Income Tax – 9.3% CA and 0% TN

Considerations

Food and Entertainment:
 $3600 per year

Car payment (lease): $300/mo
 25 MPG

Car insurance:
 LA: $842/yr
 TN: $659/yr
Decision

Which location will let Octavio reach his
savings goal the fastest?
 Without Sensitivity Analysis
 With Sensitivity Analysis
Without Sensitivity Analysis
Tennessee is the obvious choice given
the considerations
 Knoxville: Goal is reached in 9 years
with $4700 leftover
 Los Angeles: Goal is reached in 12
years with $1500 leftover

With Sensitivity Analysis
What does it take to make Los Angeles
more financially desirable?
 Factors to consider

 Raises
 Savings APR
 Inflation
 Affordable Apartment in each city
 Affordable car in each city
 Starting Salary
Starting Income
Car Lease Payments
BMW ///3 (M3)
BMW 328i
Conclusions
It depends…
 Personally, we would stay in L.A.
 Sacrifices can be made
 If you do not mind living in Knoxville,
then you can either lease an M3 or you
can stay in a MUCH more luxurious
apartment.
 Your choice!

Resources


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

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www.google.com
http://www.sniksnak.com/ac/costs.html - Dog Annual Cost
http://swz.salary.com/costoflivingwizard/layoutscripts/coll_res
ult.asp?presentsalary=70000&presenthomemetrocode=98&p
resentworkmetrocode=98&newhomemetrocode=84&newwor
kmetrocode=84&x=56&y=6 – Cost of Living Estimates and
Salary Comparison and State Income Tax
Rent.com – Apartment Information
Ncsl.org – Annual Health Care Cost
Losangelesgasprices.com – Gas Prices…in Los Angeles, CA
Knoxvillegasprices.com – Gas Prices…in Knoxville, TN
Iii.org – Car Insurance