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.)

Please work the following problem on an EXCEL spreadsheet. An elegant solution is not required, Just provide all the steps so I will understand the concept and be able to replicate it for similar problems. Also, provide a written description leading me through the solution.

PROBLEM:

A Company must make decisions on weekly production. The Company makes two products; Patio bars and barstools. Each bar contributes $20 and each barstool contributes $8 toward profit. The Company can sell all the products it makes but market demand requires that they must make at least two barstools for each bar that they produce.

There are constraints on production. The Company will have available only 24,000 units of raw materials, 12,000 labor hours, and $20,000 for supplies. Each bar requires 6 units of raw materials, 2 hours of labor, and $3 in supplies. Each barstool requires 3 units of raw material, 4 hours of labor, $3 in supplies. According to the union contract, the Company must produce 4,000 items each week.

The Company plans to maximize profit contribution for the weekly production. How many bars and how many barstools should the Company produce each week?

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.)

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?

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.

1. Prepare a Cash Receipts Budget for the quarter ending June 30th, by month and quarter. You do not need a formal sales budget since the sales budget is above in the data.
2. Prepare a merchandise purchase budget by month and quarter. A merchandiser purchases in dollars. I have set up a formatted budget for you. You can see how I have made a few minor changes to Schedule 2 on page 356, which is a production budget which we are not preparing. Make sure you think about the numbers you use in the quarter column. I am specifically talking about how you handle beginning and ending inventory.
3. Prepare a Selling and Administrative Expense Budget, by month and quarter. My budget is a little bit different than the one in the text, because I used percentage of sales dollar.
4. Prepare a Cash Disbursements Budget, by month and quarter.
5. Prepare a cash budget showing the months and quarter. Use the format I have provided on the budget sheet.
Do not worry about a minimum cash balance or financing needs, since we are trying to develop a cash management plan.
6. Based on the quarterly cash budget you prepared, do you have any recommendations on cash management. Discuss the type of business and the cash flow problems a company in this industry might have. Type your answer on the budget worksheet , where I have set out the question.
7. Prepare a budgeted income statement for the quarter ending June 30, 20XX. You do not need to show monthly columns.
8. What do you think about the survivability of this business?
9. What if the company finds out the monthly rent will increase to $3,000, what budgets are effected? Why?
What is the New Net income(Loss)? If you have linked everything correctly, you should only have to change the monthly rent on this sheet to determine your answer to the questions asked.

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?

Before there was Paris Hilton, there was Consuelo Vanderbilt Balsan – a Gilded Age heiress and socialite, re-nowned for her beauty and wealth. Now Ms. Balsan’s onetime Hamptons home is slated to hit the market priced at $28 million with Tim Davis of the Corcoran Group.

Located on Ox Pasture Road in Southampton, the shingle-style home was built around 1900 and is known as “Gardenside” or “Cara-Mia”. Ms. Balsan, the great-granddaughter of railroad magnate Cornelius Vanderbilt, owned the house until her death in 1964.

According to public records, the estate is owned by Robert G. Goldstein, executive vice president and president of global gaming operations at Las Vegas Sands Corp, and his wife Sheryl, who purchased the house in 2007 for $17.4 million.” (The Wall Street Journal, August 1, 2014, M2)

1. Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number).
2. Assume that the growth rate you calculated in question #1 remains the same for the next 20 years. Calculate the price of the house in 20 years.
3. Assume the growth rate that you calculated in #1 prevailed since 1900. Calculate the price of the house in 1900.
4. Assume the growth rate that you calculated in #1 prevailed since 1900. Which price was paid for the house in 1964?
5. You were using the time value of money concept to answer the question #3. What is the time point 0 is this problem?

Net Present Value Practice True false questions

1. The three common discounted cash flow methods are net present value, internal rate of return, and payback.

2. The net present value (NPV) method calculates the return on investment from a project by discounting all expected future cash inflows and outflows back to the present point in time using average cost of capital.

3. Internal rate of return is a method of calculating the expected gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time.

4. A capital budgeting project is accepted if the required rate of return equals or exceeds the internal rate of return.

5. The net present value method can be used in situations where the required rate of return varies over the life of the project.

6. The net present value method accurately assumes that project cash flows can only be reinvested at the discount rate used.