Article 1 Presi Notes

Ella and Aaron Martin together earn approximately $92,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost $200,000. a. how much of annual income do you reccoment they hold in liquid savings as reserves? why? b. How much of their investment portfolio do you reccoment they hold in savings and other short term vehicles? Explain. c. How much, in total, should they hold in short term liquid assets?     Determine the right amount of short term, liquid assets.      (Explain.)     (Explain.)     How much in total in liquid assets:

Olivia sets up her home design company as a corporation. She expects to generate cash flows of $500,000 per year. She will fund the corporation with $4,500,000 and the corporation will be funded entirely with equity. Assume Olivia faces a tax rate of 30%. Using a discount rate of 8%, what is the NPV of the company? Responses -$125,000 -$125,000 $0 $0 $1,750,000 $1,750,000 -$1,750,000

Grace is a conservative middle-aged, single lady earning a decent income from her position as a Senior Manager in a sizeable property management company in Hong Kong. She is quite a risk-averse and her major investment (except her residential property which is already fully paid, with a current market value of $5,500,000) consists of $2,000,000 U.S. government bond, $500,000 international bond funds, and $1,000,000 local income stocks. However, she is going to retire in about 10 years and she is quite worried that her current investments may not give her any inflation protection and cover her retirement life.a. Taking her age and job into account, would you recommend any major changes to her investment portfolio?b. Discuss the major investment risks faced by Grace.c. If Grace insists on changing part of her investment portfolio to more risky investments in order to cover the inflation and her retirement life, what are your fair suggestions/ recommendations to her?

Atita plans to gift $150,000 to her daughters as a gift in the future. She thinks it will help her daughter fulfil her dreams when she reaches her age to marry. Assume her daughter is 3 years old and may get married in her 20s. Assume that Atita has $30,000 and wishes to invest that in a financial asset with a 9% rate of return per annum.   Required:   How would you define the amount of $30 000 and $150 000 in terms of the time value of money?                                                                                                                ANSWER a (i): (answer box will enlarge as you enter your response)   How long will she have to wait until she reaches the goal of $150 000?                                                                                                               ANSWER a (ii):   Mark will receive $13,500 from his parent at the end of each year for five years. He plans to invest them in a financial asset with an interest rate of 7.5%. How much money…

Iris intends to invest in a new clothing line and needs a total of K250,000 as start-up capital. She intends to raise 70% of her capital through ordinary share investors and 30% through a bank loan facility. Her investors will require a 20% return on their investment and the bank will charge her interest of 25%. Given a tax rate of 35%. Calculate the weighted average cost of capital.

(A) Suppose Mr. Ali, a manager in a financial firm, has just won a lottery of worth $ 10,000 and is planning to retire thirty years from today. He expects that he may need $ 45,000 on the marriage of his daughter 20 years from today, $ 15,000 to exchange his old car with the new one 15 years from today and $ 150,000 to purchase a house exactly at the retirement age. He determines that he needs $20,000 per year once he retires, with the first retirement funds withdrawn one year from the day he retires. He estimates that he will earn 9 % per year on the retirement funds and that he will need funds up to and including his 20th birthday after retirement. i. How much he needs to deposit in an account today so that he has enough funds to meet all his future expenditures? ii. How much he needs to deposit each year in an account, starting one year from today upto his retirement age, so that he may have enough funds to meet all his future requirements? (B) Suppose that an investment promises to…

Jason and Kerri​ Consalvo, both in their​ 50's, have ​$47,000 to invest and plan to retire in 10 years. They are considering two investments. The first is a utility company common stock that costs ​$47 per share and pays dividends of ​$2.35 per share per year​ (a 5% dividend​ yield). Note that these dividends will be taxed at the same rates that apply to​ long-term capital gains. The Consalvos do not expect the value of this stock to increase. The other investment under consideration is a highly rated corporate bond that currently sells for $1,000 and pays annual interest at a rate of 6.0%​, or ​$60.00 per $1,000 invested. After 10​ years, these bonds will be repaid at​ par, or $1,000 per $1,000 invested. Assume that the Consalvos keep the income from their investments but do not reinvest it​ (they keep the cash in a​ non-interest-bearing bank​ account). They​ will, however, need to pay income taxes on their investment income. If they buy the​ stock, they will sell it after 10 years.…

Suppose a husband wants to take his wife on a trip three years from now to Europe to celebrate their 40th anniversary. He has just received a $24,000 inheritance from an uncle and intends to invest it for the trip. The husband estimates the trip will cost $31,000 and he believes he can earn 8% interest, compounded annually, on his investment. Complete the following table to calculate the future value. Will he be able to pay for the trip with the accumulated investment amount? Note: Use tables, Excel, or a financial calculator. Round your final answers to the nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Please answer the three questions below. A. Harriet just inherited $50,000,000. She knows nothing about money management and hasdecided to educate herself in that area before making any major decisions. She has ashort-term investment for that period. She has the choice between two investments: Investment A: at 6.5% compounded daily Investment B: at 7% compounded semi-annually i. Which option should she choose and why?

Suppose a husband wants to take his wife on a trip three years from now to Europe to celebrate their 40th anniversary. He has just received a $20,000 inheritance from an uncle and intends to invest it for the trip. The husband estimates the trip will cost $23,500 and he believes he can earn 5% interest, compounded annually, on his investment. Complete the following table to calculate the future value. Will he be able to pay for the trip with the accumulated investment amount? Note: Use tables, Excel, or a financial calculator. Round your final answers to the nearest whole dollar

Janet is comparing two tax-efficient investments options. Janet is 25 and her marginal tax rate is 32%. She is planning to invest $5,000 per year into her RRSP until she retires at 65. The money will be invested in a Canadian ETF that is expected to return 10% per year. Assume that she will withdraw her RRSP in one lump sum at 65 and that the marginal tax rate at 65 is 50%.                                                        Instead of making the annual RRSP contribution in (A), she would use the $5,000 per year to service an interest-only investment loan to create her self-created tax shelter. The rate of interest on the loan is 6%. She will invest the money in the same Canadian ETF that earns 10%. The expected rate of return of 10% on the mutual fund is all capital gains and no dividends.   Required : How much money will she have after taxes if she invests in the RRSP? (6 marks) How much money will she have after taxes if she invests in the tax shelter? (6 marks) In (B), if the…

On April 29, 2017, Corey purchased 2,000 units in a Canadian mutual fund company for $13,000. On April 29, 2021, he sold 1,500 shares when they hit $29/share and incurred a large gain. He of course bragged about the gain but did not tell anyone about the capital loss of $5,000 that he also incurred on some other mutual funds sold earlier in the year in January 2021. His tax rate is 40%, how much tax will he pay on the sale of these investments

Komiko Tanaka invests $14,500 in LymaBean, Incorporated. LymaBean does not pay any dividends. Komiko projects that her investment will generate a 10 percent before-tax rate of return. She plans to invest for the long term. How much cash will Komiko retain, after taxes, if she holds the investment for 15 years and then she sells when the long-term capital gains rate is 15 percent?

Stefani​ German, a​ 40-year-old woman, plans to retire at age​ 65, and she wants to accumulate ​$420,000 over the next 25 years to supplement the retirement programs provided by the federal government and her employer. She expects to earn an average annual return of about 6% by investing in a​ low-risk portfolio containing about 20% ​short-term securities, 30% common​ stock, and 50% bonds. Stefani currently has ​$32,620 that at an annual rate of return of 6% will grow to about ​$140,000 by her 65th birthday​ (the $140,000 figure is found using time value of money​ techniques, Chapter 4​ Appendix.) Stefani consults a financial advisor to determine how much money she should save each year to meet her retirement savings objective. The advisor tells Stefani that if she saves about ​$18.23 each​ year, she will accumulate​ $1,000 by age 65. Saving 5 times that amount each​ year, $91.15​, allows Stefani to accumulate roughly​ $5,000 by age 65. a. How much additional money does Stefani need to…

Komiko Tanaka invests $13,000 in LymaBean, Inc. LymaBean does not pay any dividends. Komiko projects that her investment will generate a 10 percent before-tax rate of return. She plans to invest for the long term. a. How much cash will Komiko retain, after-taxes, if she holds the investment for five years and then she sells it when the long-term capital gains rate is 15 percent?

1.) The client inherited stocks from their grandfather when he passed away. Their grandfather bought half of them a month ago for $100,000 and they are now worth $150,000. The other half was purchased two years ago for $250,000 and they are now worth $500,000. The client wants to sell them tomorrow - what will the tax consequences be?