Reference no: EM13721603
Sami, 34, and Ronald, 31, want to buy their first home. Their current combined net income is $65,000 and they have two auto loans totalling $32,000. They have saved approximately $12,00 for the purchase of their home and have total assets worth $55,000 which are mostly savings for retirement. Ronald has always been cautious about spending large amounts of money, but sami really likes the idea of owning their own home. They do not have a budget but they do keep track of their expenses, which amounted to $55,000 last year including taxes. They pay off all credit card bills on a monthly basis and do not have any other debts or loans outstanding. Other than that, they do not spend a great deal of time tracking their finances.
1. What financial statements should Sami and Ronald prepare to begin realizing their home purchase goal? What records should they use to compile these statements?
2. Use the worksheets or simply calculate their net worth and income surplus. How does their net worth compare to other "thirty-some things"?
3. Calculate and interpret their month's living expenses covered ratio and their debt ratio.
4. What other information would be necessary or helpful to develop more complete statements? Give as much detail as possible.
5. What six- to eight- step process should Sami and Ronald undertake to develop a budget?
6. Why might adopting Principle 6: Waste Not, Want Not- Smart Spending Matters be important to Sami and Ronald, given their goal of home ownership?
|
What is the modified internal rate of return for the project
: A company has an opportunity to invest in a project that is expected to result in after-tax cash flows of $18,000 the first year, $20,000 the second year, $23,000 the third year, -$8,000 the fourth year, $30,000 the fifth year, $36,000 the sixth year..
|
|
Calculate the price of a share of companys common stock
: You are given the following information: Stockholders' equity = $3.75 billion, price/earnings ratio = 15.5, common shares outstanding = 12 million, and market/book ratio = 2. Calculate the price of a share of the company's common stock. Round your an..
|
|
Equity outstanding and bonds outstanding
: Consider two firms A and B that are identical in all respects except capital structure. Firm A has $100 million in equity outstanding and $40 million in bonds outstanding. Firm B has $140 million in equity outstanding and $0 million in bonds outstand..
|
|
The bonds make semi annual payments
: Night Hawk Co. issued 16-year bonds two years ago at a coupon rate of 9.0 percent. The bonds make semi annual payments. Required: If these bonds currently sell for 114 percent of par value, what is the YTM?
|
|
Months living expenses covered ratio and their debt ratio
: Sami, 34, and Ronald, 31, want to buy their first home. Their current combined net income is $65,000 and they have two auto loans totalling $32,000. They have saved approximately $12,00 for the purchase of their home and have total assets worth $55,0..
|
|
Briefly describe bankruptcy law
: Briefly describe bankruptcy law. If a firm were to default on its bonds, would the company be liquidated immediately? Would the bondholders be assured of receiving all of their promised payments?
|
|
Standard merger guidelines of the federal reserve
: The banking market in Athens, Ohio, currently has four banks with market shares of 60 percent, 20 percent, 15 percent and 5 percent. The two smallest banks have proposed merging. Under the standard merger guidelines of the Federal Reserve and the Jus..
|
|
Find an article about a company reporting key financial news
: Search current news (less than 6 months old) and find an article about a company reporting key financial news (e.g. landing a large contract, reporting unusual profits or losses, expressing concern for future profitability, etc.). Briefly review the ..
|
|
What is the new market value of the company
: Again, Inc., is proposing a rights offering. Presently, there are 490,000 shares outstanding at $75 each. There will be 80,000 new shares offered at $71 each. What is the new market value of the company? How many rights are associated with one of the..
|