Fin 3331 assignment emily smith just received a promotion at work

FIN 3331 Assignment

Emily Smith just received a promotion at work that increased her annual salary to $42,000. She is eligible to participate in her employer’s 401(k) retirement plan to which the employer matches, dollar for dollar, workers’ contributions up to 5% of salary. However, Emily wants to buy a new $25,000 car in 3 years, and she wants to have enough money to make a $10,000 down payment on the car and finance the balance. Fortunately, she expects a sizable bonus this year that she hopes will cover that down payment in 3 years.

A wedding is also in her plans. Emily and her boyfriend, Paul, have set a wedding date two years in the future, after he finishes medical school. In addition, Emily and Paul want to buy a home of their own in 5 years. This might be possible because two years later, Emily will be eligible to access a trust fund left to her as an inheritance by her late grandfather. Her trust fund has$80,000 invested at an interest rate of 5%.

1.      Justify Emily’s participation in her employer’s 401(k) plan using the time value of money concepts by calculating the actualannual return on her own contributions. She will contribute $1,000 per year to her 401(k) for 25 years and the employer will match dollar for dollar. Assume that her 401(k) earns 6% per year for 25 years and all contributions are made at the end of each year.

 

2.      Calculate the amount of money that Emily needs to set aside from her bonus this year to cover the down payment on a new car, assuming she can earn 4% on her savings. What if she could earn 10% on her savings?

 

3.      What will be the value of Emily’s trust fund in 36 years, assuming she takes possession of $20,000 in 2 years for her wedding, and leaves the remaining amount of money untouched where it is currently invested?

 

4.      Suggest at least two conditions that Emily and Paul could take to accumulate more for their retirement.

 

5.      Suppose that Emily and Paul purchase a $200,000 home in 5 years and make $40,000 down payment immediately. Find the monthly mortgage payment assuming that the remaining balance is financed at a 3% fixed rate for 15 years. What if its mortgage term is 30 years?

 

6.      What can you conclude about the relationship between the mortgage term and the amount of the monthly payment? From Question 5, is the monthly payment with the 30-year term half as large as the monthly payment with the 15-year term? Explain.

 

 

Use the following information to answer the following questions.

                 ABC, Inc. Income Statement (in thousands)

                                        December 31, 2014

Sales                                                                                     $200,000

Cost of goods sold                                                              140,000

Gross profit on sales                                                            60,000

Operating expenses                                                             56,000

Operating income (EBIT)                                                      4,000

Interest expense                                                                       1,000

Earnings before tax                                                                 3,000

Income tax                                                                                 1,050

Net income available to common stockholders          $1,950

Number of shares outstanding                                            1, 500

Market price per share                  $22

                    ABC, Inc. Balance Sheet (in thousands)

                                        December 31, 2014

Assets

Cash                                                                                         $2,000

Accounts receivable                                                             17,800

Inventories                                                                                8,700

Total current assets                                                              28,500

Gross fixed assets                                                                 70,000

Accumulated depreciation                                                26,500

Net fixed assets                                                                     43,500

Total assets                                                                          $72,000

Liabilities and Equity

Accounts payable                                                              $18,000

Accruals                                                                                  13,350

Total current liabilities                                                       31,350

Long-term debt                                                                        8,250

Total liabilities                                                                      39,600

Common stock (par value and paid in capital)            2,000

Retained earnings                                                                30,400

Total stockholders’ equity                                                  32,400

Total liabilities and equity                                              $72,000

Industry Key Ratios

                                             Industry Average Ratios

Current ratio                                          1.1

Quick ratio                                           0.60

Days Sales Outstanding (DSO)      25 days

Fixed assets turnover                          5.8

Total asset turnover                          2.95

Liabilities-to-assets ratio                 65%

Times-interest-earned                        3.2

Net profit margin                             1.3%

Return on equity                            7.32%

Price/earnings ratio                     20.38

Market/book ratio                         3.19

1.      Calculate current ratio and acid test ratio for the firm.

 

2.      Calculate DSO, fixed assets turnover, and total asset turnover for the firm.

 

3.      Calculate liabilities-to-assets ratio and times-interest-earned ratio for the firm.

 

4.      Calculate net profit margin and return on equity for the firm.

 

5.      Evaluate the performance of the firmin the following areas:

 

Liquidity management

Asset management

Debt management

Profitability management

 

When you explain the firm’s strength or weakness in each area, you must support your arguments through the evaluative reasoning process by providing reasons, methods, criteria, or assumptions behind the claims made.

 

6.      Deductive reasoning starts with a general principle and deduces that it applies to a specific case. Deductive reasoning moves with exacting precision from the assumed truth of a set of premises to a conclusion which cannot be false if those premises are true. Explain the deductive reasoning process applied to analyze thefirm’s performance.

 

 

 

 

 

 

 







Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10