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Short Story Problem for Insurance Needs
You have been recommended by an attorney to work with his clients to assist with their insurance needs for their business. The business, ABC Company, is owned equally by two partners, Jim, age 56 and Fred, age 42. The business is valued at $5 million and is organized as a Subchapter S Corporation. Each partner receives $1M annually in wages and Subchapter S dividends. Each partner is contributing the maximum to the Company 401(k) plan annually.
When you meet with them, you learn that they have no buy-sell agreement and no insurance. They tell you that they want to protect their families in the event of a death of a partner, and that they also want to be able to establish a retirement savings program for each of them individually outside of the Company 401(k) program. Each partner is married with children. They each have a net worth of $5 Million, including their ownership share of the Company.
They ask you to make recommendations to them to develop a plan of insurance for their personal and business needs. Please provide your recommendations, and make assumptions on which you will make your recommendation. You should discuss the types of insurance policies you would recommend and why you recommend them. Please keep your discussion to no more that 3 typewritten pages, double-spaced.
A $100,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.80 while the beta of stock B is 0.20. One-half of the portfolios is invested in the risk-free security. How much is invested in stock A if the beta of t..
Corizon company balance sheet and income statement shown below (million). Calculate the pre-tax earning before and after the recapitalization?
You need to choose between investing in a one-year municipal bond with a 7 percent yield and a one-year corporate bond with an 11 percent yield. If your marginal federal income tax rate is 30 percent and no other differences exist between these two s..
Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $100 million each year and expects these to grow at 4% each year. The upfront project costs are $900 million and Ford's weighted average cost of capital is 9%. If th..
The Yurdone Corporation wants to set up a private cemetry business. According to the CFO, Barry M. Deep, business is "looking up". The company is somewhat unsure about the assumptions of a growth rate of 5.7 percent its cash flows. At what constant g..
An investment account was initiated with an investment of $1000. The fund had grown to $1200 after one year, and an additional $1000 was invested. The fund balance at the end of two years was $2200. What annual effective interest rate was earned in t..
A firm has decided to borrow 500,000 on a 10% add on basis, payable in 6 end of the month installments. What would the nominal annual rate be on the loan be?
Suppose a 10-year, $1,000 bond with a 7% coupon rate and semi annual coupons is trading for a price of $1,195.23. What is the bond's yield to maturity (expressed as an APR with semi annual compounding.)? If the bonds yield to maturity changes to 9% A..
Discuss and compare the different types of investment appraisal methods My Velo can use, including a discussion of the advantages and disadvantages of each.
You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer's fina..
Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..
You are comparing two callable bonds that are exactly the same; however one of them has a higher call premium. This bond is more likely
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