Q1. Investment appraisal
(a)
Project A Project B Project C Project D
Initial investment $120000 $160000 $90000 $70000
Annual cash flow ($40000-$16000-$12000)
$12000 ($75000-$27000-$16000)
$32000 ($60000-$15000-$9000)
$36000 ($60000-$18000-$7000)
$85000
Payback period: initial investment/ annual cash flow 120000/12000
10 years 160000/32000
5 years $90000/36000
2.5 years $70000/85000
2 years
Project C and D are acceptable as both of their payback periods are less than the pre specified number of years which is 3 years in this case. According to the payback method of analysis, projects with shorter payback periods are better to invest in, Hence, project D should be accepted as it is most liquid and less risky to
…show more content…
How large a fund will you need when you retire in 20 years to provide the 30-year, $20,000 retirement annuity?
N 30
I/YR 11
PMT 20000
FV 0
PV?? 173875.85
b. How much will you need today as a single amount to provide the fund calculated in part (a) if you earn only 9% per year during the 20 years preceding retirement?
N 20
I/YR 9
PMT 0
FV -173875.85
PV?? 31024.82
c. An increase in the rate earned will decrease the present value. This is because higher interest rate will mean that less money will be set aside today in order to earn the future value calculated above. For example, to earn $173875.82 in 20 years with interest rate lower than 9% will decrease the present value of $31024.82.
d. Now assume that you will earn 10% from now through the end of your retirement. You want to make 20 end-of-year deposits into your retirement account that will fund the 30-year stream of $20,000 annual annuity payments. How large do your annual deposits have to
…show more content…
Liquidity Ratio Formula 2015 2014
Current ratio Current assets/current liabilities 3.269 2.994
Quick Ratio (current assets – inventory)/ current liabilities 0.661 0.469
Inventory turnover Cost of goods sold/ inventory 0.993 0.971
The financial health of MHJ does not look promising as it can be seen above even though the current ratio indicates that the company is able to pay its debt in the longer period but in the short run the quick ratio suggests that MHJ is unable to pay its current debts that fall due within a year as the ratio is below 1. The inventory turnover ratio is low which means the company is not efficiently turning their inventory over into sales.
Capital structure Formula 2015 2016
Debt ratio Total liabilities/total assets 0.465 0.467 The debt ratio shows that MHJ has 0.465 assets to repay $1 of liability in 2015 and 0.476 in 2014. This is an indicator that MHJ is not able to repay it debt when they fall due.
Profitability
Formula 2015 2014
Gross profit margin Gross profit/sales 0.640 0.640
Operating profit margin EBIT/sales 7.95 8.88
REFERENCE LIST
Besley, S., Brigham, E. (2014) CFIN (4th edition). Australia,
This paper explores the characteristics of traditional and Roth IRAs, as well as the similarities and differences between both. The main characteristic of both IRAs is that both are considered tax shelters—a way for individuals to receive reduced tax liability by decreasing one’s taxable income. Traditional IRA’s are called “deductible” because contributions made with earned income, up to specified limits, are fully or partially deductible from income depending upon factors such as adjusted gross income and filing status. Upon withdrawal, the money is then taxed as ordinary income. Roth IRAs are the antithesis—the money that you contribute here is already taxed at your marginal tax rate and the withdrawals are generally not taxed. Only money that is considered investment income is taxed. Because of the income limits of Roth IRAs, some individuals choose first to contribute to traditional IRAs or employer-sponsored programs and subsequently convert to a Roth IRA. For younger individuals with lower incomes, Roth IRAs seem to be the better choice based on the below research. The money is taxed at a lower rate and then contributed. As one ages, tax rates are probable to rise and the cost of contributing increases as a result. Saving in full measure, below the legal limit and beginning this process at a young age seems the best option for a enjoyable retirement in years to come.
You might be tempted to dip into your retirement fund for a major purchase, find the will to resist. You’ll pay extra fees and taxes, and you are robbing your future self. If you leave it alone, your money will continue to grow year after year. Your gains can be reinvested and you’ll earn more than you would have with just a small chunk of
Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio and quick ratio are really low and have been decreasing. For 1995, the current ratio is 1.15:1, which is less than the industry average of 1.60:1, however to give a better sense of where this stands in the industry, as seen in exhibit 3, it is actually less than the average of the bottom 25% of the industry. The quick ratio is 0.61 is less than the industry is 0.90. Both these ratios serve to point out the lack of cash in this company. The cash flow has been decreasing because, it takes longer to get the money from customers, but the company still needs to pay for its purchases. Also, the company couldn’t go over the $400,000 loan limit, so they were forced to stretch their cash.
Analyzing Wal-Mart's annual report provides a positive outlook on Wal-Mart's financial health. Given the specific ratios and its comparison to other companies in the same industry, Wal-Mart is leading and more than likely continue its dominance. Though Wal-Mart did not lead in all numbers, its leadership and strong presence of the market cements the ongoing success. The review of the current ratio, quick ratio, inventory turnover ratio, debt ratio, net profit margin ratio, ROI, ROE, and P/E ratio all indicate an upbeat future for the company. The current ratio, which is defined as current assets divided by current liabilities, is a measure of how much liabilities a company has compared to its assets. Wal-Mart in the year of 2007 had a current ratio of .90, and as of January 2008 it had a current ratio of .81. The quick ratio, which is defined as current assets minus inventory divided by current liabilities, is a measure of a company's ability pay short term obligations. Wal-Mart in the year of 2007 had a quick ratio of .25, and as of January 2008 it had a ratio of .21. Both the current ratio and quick ratio are a measure of liquidity. Wal-Mart is not as liquid as its competitors such as Costco or Family Dollar Stores Inc. I believe the reason why Wal-Mart is not too liquid is because they are heavily investing their profits for expansion and growth. Management claims in their financial report that holding their liquid reserves in other currencies have helped Wal-Mart hedge against inflationary pressures of the US dollar. The next ratio to look at is the inventory ratio which is defined as the cost of sales divided by average inventory. In the year of 2007, Wal-Mart’s inventory ratio was 7.68, and as of January 2008 it was 7.96. Wal-Mart has a lot of sales therefore it doesn’t have too much a problem of holding too much inventory. Its competitors have similar ratios though they don’t have as much sales as Wal-Mart. Wal-Mart’s ability to sell at lower prices for same quality, gives them the edge against its competition. As of the year 2007, Wal-Mart had a debt ratio of .58, and as of January 2008, it had a debt ratio of .59. The debt ratio is calculated by dividing the total debt by its total assets. Wal-Mart has a lot more assets than it does debt so Wal-Mart is not overleveraged.
The two main issues in this case are the project analysis and financial forecasting. The project should be analyzed before doing the forecasting, because any recommendations on the project will affect financial forecasting for the next two years.
The financial statements from Johns Hopkins Hospital (JHH) were used to calculate and analyze the meaning of the financial health of the organization from the years 2010-2012 (Appendix A). The following five major types of ratios were used: common size, liquidity, solvency, efficiency, and profitability
Goodrich pays a fixed interest of 11.2% + 1% = 12.2% a savings of 20
B. This is called compounding, the more time you give your investment to grow, the bigger it will get.
...money right now will have their thousand dollars plus interest, and those who choose the latter option which is collecting the money in three years will have their thousand dollars minus interest because they did not do anything with the money.
Figure out how much income you'll need in retirement. Retirees told us that to support ...
After working on the retirement spreadsheet and doing research about my field of study, I have come up with an ideal retirement plan that I believe will serve me well throughout my retirement years. I used data from the Bureau of Labor Statistics to determine my initial starting salary as an Industrial Engineer. I am assuming that my first job will be paying me around that salary. My plan is to work for a single major company with a pension plan for about 38 years. I plan to graduate at age 22 and start working immediately after graduation which would put my retirement age 60. My investment portfolio before retirement is to be somewhat diversified with a heavy emphasis on high investment stocks and the real estate market. I plan to travel out of the country about once a year and locally (out of the state but driving distance) several times a year.
...ation, planning, and considerations, retirement funds can be extremely low and can therefore cause severe hardship. It may cause retirement to be pushed back past the age of 70 to have access to enough funds. It could also bear stress to other family members, children for example, which would have to help out financially and delay their retirement plans. Utilizing the proper education, research tools, guidelines, and determination retirement plans can be set in place early to leave room to fluctuate over time. It is no one else’s responsibility but one’s own to prepare for their future, and therefore should take matters in their own hands. The question now is, are you prepared for retirement, and if not what steps are you going to take?
ii. A company borrows £2,000,000 in 1998, with a fixed interest rate of 8%, payable annually for a 5 year period.
In order to understand how to deal with money the important idea to know is the time value of money. Time Value of Money (TVM) is the simple concept that a dollar that someone has now is worth more than the dollar that person will receive in the future, this is because the money that the person holds today is worth more because it can be invested and earn interest (Web Finance, Inc., 2007). The following paper will explain how annuities affect TVM problems and investment outcomes. The issues that impact TCM will also be discussed: Interest rates and compounding (with two problems), present value, future value, opportunity cost, annuities and the rule of '72.
Financial - How much do you want to be worth 10 years from now? How much income do you expect to earn by then? What about assets and net worth?