Calculate the amount of insurance

Question

Using the given information make an estimate of the amount of insurance to be carried using the 'Needs Approach' & the Capital Retention Approach."  Suppose a pretax interest rate of 6 percent, a tax rate of 30percent, no inflation and that Mr. Greenleaf's earnings will remain constant.

Current cash needs:
Final expenses	$15,000
Emergency Fund	$20,000
Mortgage Fund	$207,000
Notes and Loans Payable	$42,500
Educational Expenses (NPV)*
Charles (age 18) $
Tiffany (age 14) $
Mark (age 8) $

 Total Educational Expenses

The college expenses are estimated at 20,000dollar a year for four years for each child.  The easiest way to estimate the present value of this total of 240,000 dollar is to compute the present value of $20,000 payable over the four years for Charles, age 18 this will be the amount that he needs now.  Then discount a similar sum an additional four years for Tiffany, age 14, and an additional ten years for Mark, age 8.

Total Current Cash Needs:	$	$
Plus Capital Needs:	Needs Approach	Capital Retention
For Spouses income:
(Use 60% of joint income)
$9200 monthly for 42.5 years
(Her life expectancy is 84.5)
After Tax interest Rate___%
Use a 30% Tax Rate	$	$
Less: The Present Value
Wife's wages of $3,917
Monthly to age 66
(Use the after tax interest rate
Social Security Payments
Survivor's benefits to Mark's age 18.
$1600 monthly	$	$
(Use the pretax interest rate)
Retirement income at Wife's age 66
$650	$	$
(Use the after tax interest rate)
Wife employer pension
$1300 monthly at age 66
(Use after tax interest rate)
Total Capital requirements	$	$
Total Capital Requirements	$	$
And Current cash needs
Total
Less Capital Assets
Life Insurance	$210,000
Cash	$15,000
Investments	$134,000
Other	$61,000
Total	$420,000	$420,000
Surplus or (Deficit)	$	$