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John Wilson is a 42-year-old computer programmer, husband, and father of four. He wants to use the capital retention approach to determine how much life insurance he should purchase. Because of his $105,000 salary and their four children, his wife does not work outside the home. The family’s current annual living expenses are approximately $75,000, including $8,000 in annual IRA contributions. He prefers to use the capital retention approach (CRA) so that he can be reasonably assured that his family will not exhaust the proceeds of his policy. However, he also wants to consider the possible reduction in expenses and apply a 70% replacement ratio to the calculation.a. Calculate John’s insurance need using the capital retention approach, an after-tax discount rate of 5.5%, and assume end-of period payment of benefits.b. Calculate John’s insurance need using the human life value approach (HLV), an after-tax discount rate of 5.5%, a remaining working life of 25 years, and assume end-of period payment of benefits.After your presentation, John was bewildered about why the HLV and CRA calculations resulted in significantly different insurance needs. Using the two formulas as a guide, explain to John why this result occurred.
Be sure to factor in any dividends paid on the stock during the four-week period and the interest paid on the borrowed funds. Show your calculations. very important to show the calculation.
Describe the cause and effect relationship resulting from the use of air miles as the allocation base. In which of cost pools do you think the cause and effect relationship is the strongest?
However, to replace the old machine, Topsider has 2 options to choose from; Cutting Machine A and Cutting Machine B. Information about these 2 machines can be found below.
Dudley Hill Golf Club's market-to-book ratio is currently 2.8 times and the PE ratio is 6.90 times. Dudley Hill Golf Club's common stock is currently selling at $26.04 per share.
q. which of the employee benefits has greater value? suppose a 28tax rate.a a non-taxable pension contribution of 4300
Describe SOX requirements
Create a scenario where an investor would benefit from using forward and future contracts to hedge and Explain how interest rates impact the scenario.
Garth wants to invest only in Investment grade bonds or better. His strategy is to hold the bond until maturity and he wants to earn a YTM of 8% or better.
Enter rounded answers as directed, but do not use the rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
Suppose you can purchase an optical scanner today for $400. The scanner provides benefits worth $60 a year. The expected life of the scanner is tenm years. Scanners are expected to decrease in price by 20% per year.
A company issues $5,000,000, 7.8%, 20-year bonds to yeild 8% on January 1, 2007. Using effective-interest amortization, what will the carrying value of bonds be on December 31, 2007 balance sheet?
If the riskless rate is 3% and the market return is 8%, estimate Firm A's cost of equity for the new business using the CAPM.
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