Day: April 26, 2018

Larry is 40 year old and has never married. He wants to retire at age 62 with an 80% wage replacement ratio. Larry currently earns $100,000 as an employee and has managed to save $100,000 towards his retirement goal (including investment assets and cash equivalents). He is currently saving $5,000 per year in his 401(k) plan. His employer’s plan calls for a 50% match for contributions up to an employee elective deferral of 6%.

Financial Goal: Larry’s primary goal, for this example, is to retire at 62 with an 80% wage replacement, including Social Security, projected to be $30,000 in today’s dollars at normal retirement age of 67. He wants to plan for a life expectancy to age 95.

Economic and Investment Information:
General inflation is expected to average 3.0% annually for the foreseeable future.
Larry’s expected investment portfolio rate of return is 8.5%
Larry’s marginal income tax rate is 25%.

Problems:
Calculate how much Larry will need on the day he retires to meet his retirement goal.
Calculate how much he needs to save regularly to meet his retirement goal. (Discuss if he can meet his current retirement goal with his current savings pattern.)
Provide 3 alternatives for Larry to consider and explain why each alternative might work. (Explain why each alternative might or might not work and explain why.)

Q4
The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company’s sales were to increase to RM1.5 million, its cost of goods sold would increase to RM900,000.

Q5
The company’s CEO is unhappy with the forecast and wants the firm to achieve a net income equal to RM240,000. Assume that Hebat’s interest expense remains constant. At what level of sales the company has to achieve it wants to obtain this net income.

Q6
Nilai Services Bhd. reported RM2.3 million of retained earnings on its balance sheet last year. This year, the company has incurred a loss of RM500,000 (negative RM500,000). Despite the loss, the company still paid RM1.00 dividend per share this year. The company’s earnings per share for this year were -RM2.50 (negative RM2.50). What was the level of retained earnings on the company’s balance sheet this year?

1. Why is it necessary to know about time value of money concepts? Why can’t you just make judgments about future cash flows based purely on the size of the cash flows?

2. Define Future Value.

3. Define Present Value.

4. What are annuities?

5. (calculating future value) You buy an 8 year, 7% CD for $1,000. Interest is compounded annually. How much is it worth at maturity?

6. (calculating present value) What’s the present value of $10,000 to be received in 6 years? (Your required rate of return is 10% a year.)

7. (calculating the rate of return) A friend promises to pay you $500 three years from now if you loan him $400 today. What interest rate is your friend offering you?

8. (calculating the future value of an annuity) If you invest $100 a year for 20 years at 6% annual interest, how much will you have at the end of the 20th year?

9. (calculating the present value of an annuity) How much would you be willing to pay today for an investment that pays $700 a year at the end of the next 5 years? (Your required rate of return is 6% a year.)

10. (Rate of return of an annuity) You would like to have $1,000,000 40 years from now, but the most you can afford to invest each year is $1,000. What annual rate of return will you have to earn to reach your goal?

11. (Monthly compounding) If you bought a $1,000 face value CD that matured in six months, and which was advertised as paying 6% annual interest, compounded monthly, how much would you receive when you cashed in your CD at maturity?

12. (Annualizing a monthly rate) Your credit card statement says that you will be charged 1.03% interest a month on unpaid balances. What is the Effective Annual Rate (EAR) being charged?
13. (Monthly loan payment) Best Buy has a flat-screen HDTV on sale for $1,799. If you could borrow that amount from Carl’s Credit Union at 6% for 1 year, what would be your monthly loan payments?

14. (PV of a perpetuity) If your required rate of return was 6% a year, how much would you pay today for $100 a month forever? (that is, the stream of $100 monthly payments goes on forever, continuing to be paid to your heirs after your death)

15. (PV of an uneven cash flow stream) what is the PV of the following project?
(Assume r = 7%)
Year Cash Flow
1 $1,000
2 $2,000
3 $3,000
4 $4,000

16. (FV of an uneven cash flow stream) what is the FV at the end of year 4 of the following project?
(Assume r = 7%)
Year Cash Flow
1 $1,000
2 $2,000
3 $3,000
4 $4,000

17. Define the Capital Asset Pricing Model (CAPM).

18. Define “beta” as it applies to common stocks.

19. You have two stocks in your portfolio. $20,000 is invested in a stock with a beta of 0.6 and $40,000 is invested in a stock with a beta of 1.4. What is the beta of your portfolio?

20. If the risk-free rate is 2% and the expected rate of return on the stock market is 7%, what is the required rate of return on a stock with a beta of 1.4 according to the CAPM?

Q1
Camel Industries is expected to pay an annual dividend of RM1.30 a share next month.
The market price of the stock is RM24.80 and the growth rate is 3 percent. What is the
firm’s cost of equity?
Q2
An investment promises the following cash flow stream: RM1,000 at Time 0; RM2,000 at the
end of Year 1 (or at T=1); RM3,000 at the end of Year 2; and RM5,000 at the end of Year 3.
At a discount rate of 5%, what is the present value of the cash flow stream?
Q3
Recently you invested in a 20-year asset that pays you RM100 at t = 1, RM500 at t = 2,
RM750 at t = 3, and some fixed cash flow, X, at the end of each of the remaining 17
years. You purchased the asset for RM5,544.87. Alternative investments of equal risk
have a required return of 9%. What is the annual cash flow received at the end of each
of the final 17 years, that is, what is X?
Q4
You deposit RM1,000 in a bank account that pays 6% nominal annual interest, compounded
monthly. How much will you have in your account after 3 years?

Q7. The zero coupon bonds of Markus Inc. have a market price of RM394.47, a face value of RM1,000, and a yield to maturity of 6.87%. When will this bond mature? (Answer in number of years.)
Q8. Windmill Corp has a 15-year bond issue outstanding that pays a 9% coupon. The bond is currently priced at RM894.60 and has a par value of RM1,000. Interest is paid semiannually. What is the yield to maturity?
Q9. Creative Inc. has a current beta of 1.6. The market risk premium is 7 percent and the risk-free rate of return is 3 percent. By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.9?
Q10. The Bystanders Company has 100,000 bonds outstanding that are selling at par value (RM1,000). Bonds with similar characteristics are yielding 7.5 percent. The company also has 1 million preferred stocks and 5 million shares of common stock outstanding. The preferred stock has par value of RM100 and fixed dividend of 10.5 percent and is selling at RM56 per share. The common stock has a beta of 1.2 and sells for RM38 a share. The Treasury bill is yielding 3 percent and the return on the market is 12 percent. The corporate tax rate is 34 percent. What is Bystander’s weighted average cost of capital?

All answers should be in a single Excel file.
Show the step by step calculations how it was done and explained thoroughly by using excel:

1 If you deposit $15,000 today and earn 8% annual interest, how much will you have in 9 years?
Answer: $29,985.07

2 Tiffany will receive a graduation gift of $10,000 from her parents in 3 years. If the discount rate
is 7%, what is this gift worth today?
Answer: $8,162.98

3 What is the present value of a 20-year ordinary annuity of $30,000 using a 6% discount rate?
Answer: $344,097.64

4 You deposit $5,000 in an account that pays 8% interest per annum. How long will it take to double your money?
Answer: 9 years

5 The Johnsons have $60,000 to use as a down-payment on a house, and they want to borrow $240,000
from the bank. The current mortgage interest rate is 5%. If they make equal monthly payments for 30 years,
how much will the monthly payment be?
Answer: $1,288.37

6 Tim paid $250 per month into his 401K retirement plan. After 30 years, he had accumulated $500,000. What
average annual rate of interest had he earned over the 30 years?
Answer: 9.42%

7 Charlotte’s firm had sales of $525,000 in the year 2001. By 2012, sales had increased to $1,200,000. What was
the average annual rate of increase?
Answer: 7.80%

You are a passionate performance management consultant. Because of your expertise in performance management, you have been hired by the CEO of a large company to change a performance appraisal system to a performance management system. Because you are experienced in bringing about such transitions, you know better than anyone else that the success of such transitions depends heavily upon top managerial understanding of and support for the performance management system at hand. Thanks to your skills, you have managed to educate the top management of your client’s firm and correct their mistaken belief of equating performance appraisal with performance management. Despite the clarified understanding of performance management, the top management team is still a hard sell, and they remain skeptical about whether your proposed performance management system is any different or more effective than the performance appraisal system that the company has had in place for decades. To make matters worse, the prevailing attitude across all levels of the organization seems to be characterized by the commonly heard statement: “We have been doing this for a long time, and it seems to work just fine.” Moreover, one of the managers has challenged your plan by voicing his concern that a performance management system might create or increase the demands (such as excessive paperwork) on managers’ and employees’ time and resources. 1. Describe at least four general strategies you would take to convince the client firm that the benefits of implementing a performance management system will far outweigh the costs and difficulties associated with the transition from a performance appraisal to a performance management system. 2. Tell me why you have chosen these strategie

Description: Now it is time to bring everything together based upon the feedback that you have received. This is also another opportunity to review your plan and make revisions that you feel are pertinent. The business plan should include the concepts and ideas that were covered throughout this course. The following points need to be addressed in your business plan for the establishment of an e commerce site: The e commerce infrastructure Marketing concepts for the e commerce environment Communicating effectively in the e commerce environment Privacy and security issues in conducting business online The issues and challenges of ethics in conducting business online Utilizing social media outlets to enhance e commerce sites The implications of business to business e commerce for your business Anything else that you deem important to support your business plan for expansion to the Internet The deliverable length is 1,250 1,500 words. Ensure that the assignment adheres to APA formatting. Do not forget to include a cover page and reference page with all of your resources.

Health reform is mired in the morass of multitiered payment systems and multiple modes of access, limited by the ability to seek and to pay. Increasingly, patients are interacting with multiple entities within the system, causing more and more confusion on the part of the patient. According to recent research, patients’ trust in the system, providers, and insurers continues to decline. This may result in a decline in individual health and an increase in costs for health care. Investigate the declining trust in the health care system from an ethical and moral position. You may use the “four principles plus attention to scope model” of Beauchamp and Childress to address this, or any other ethical model that you choose. State what model you will use to investigate this issue. Identify 2 or more legal issues contributing to this problem. Identify 2 or more economic and financial issues contributing to this problem. Analyze the impact of various issues that are contributing to this problem, and rank them in order order from greatest to least impact. Propose at least 1 modification that would increase trust in the health care system with rationale.

Select a company with which you are familiar, preferably one where you have been employed, and consider a process within that company that could be improved. This could be a business process, a manufacturing process, or a service process that you have observed or been involved with. One option would be to further develop your answer to the Process Improvement discussion question from Week 1. Using library research, prepare a recommended process improvement proposal that incorporates tools and methods learned in this course. Some examples of tools and methods that could be implemented include, but are not limited to, JIT, objective and/or subjective forecasting methods, ABC classification, or project management tools. Your paper should include: A brief description of the company and how the selected process fits into the overall framework of the company. A step by step description of the process. This can follow a similar format to the IBM Credit process description in Section 1.5 of the textbook, though yours may be longer or more detailed depending on the process selected. An analysis of the current process, identifying inefficiencies. A detailed plan for reengineering the process to be more efficient, using appropriate tools and methods learned throughout the course, including a specific description of how the tools and methods will be applied. An identification of possible roadblocks in implementing the process changes. Expected benefits of the improved process. 8 double spaced pages.