Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Using the given information make an estimate of the amount of insurance to be carried using the 'Needs Approach' & the Capital Retention Approach."  Suppose a pretax interest rate of 6 percent, a tax rate of 30percent, no inflation and that Mr. Greenleaf's earnings will remain constant.

Current cash needs:

Final expenses

$15,000

Emergency Fund

$20,000

Mortgage Fund

$207,000

Notes and Loans Payable

$42,500

Educational Expenses (NPV)*

Charles (age 18) $

 

Tiffany (age 14) $

 

Mark (age 8) $

 

 Total Educational Expenses

The college expenses are estimated at 20,000dollar a year for four years for each child.  The easiest way to estimate the present value of this total of 240,000 dollar is to compute the present value of $20,000 payable over the four years for Charles, age 18 this will be the amount that he needs now.  Then discount a similar sum an additional four years for Tiffany, age 14, and an additional ten years for Mark, age 8.

Total Current Cash Needs:

$

$

Plus Capital Needs:

Needs Approach

Capital Retention

For Spouses income:

 

 

(Use 60% of joint income)

 

 

$9200 monthly for 42.5 years

 

 

(Her life expectancy is 84.5)

 

 

After Tax interest Rate___%

 

 

Use a 30% Tax Rate

$

$

Less: The Present Value

Wife's wages of $3,917

 

 

Monthly to age 66

 

 

(Use the after tax interest rate

 

 

Social Security Payments

 

 

Survivor's benefits to Mark's age 18.

 

 

$1600 monthly

$

$

(Use the pretax interest rate)

 

 

Retirement income at Wife's age 66

 

 

$650

$

$

(Use the after tax interest rate)

 

 

Wife employer pension

 

 

$1300 monthly at age 66

 

 

(Use after tax interest rate)

 

 

Total Capital requirements

$

$

Total Capital Requirements

$

$

And Current cash needs

 

 

Total

 

 

Less Capital Assets

 

 

Life Insurance

$210,000

 

Cash

$15,000

 

Investments

$134,000

 

Other

$61,000

 

Total

$420,000

$420,000

Surplus or (Deficit)

$

$

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M917177

Have any Question? 


Related Questions in Basic Finance

Is wall street a casino or an investment in the future and

Is Wall Street a casino or an investment in the future and why? Use examples to back your stances? What do you fear the most about Wall Street and investing in the stock market? Have you learned anything in this module t ...

The concentric joint of problem 4 is subjected to an

The concentric joint of problem 4 is subjected to an increase in temperature of 1008F. Does this increase or decrease the tension in the bolts? By how much? (Assume that the coefficient of linear expansion of the bolts i ...

Challenges of international financeapa stylethe balance of

Challenges of International Finance APA Style The balance of payments (BOP) can be defined as the statistical record of a country's international transactions over a certain period of time presented in the form of double ...

1 what is meant by the term structural compression how does

1. What is meant by the term "structural compression"? How does this term affect logistics? 2. What is a horizontal company and how would this type of company be organized? What are the strengths of this type of organiza ...

What is meant by break even drivers identify two important

What is meant by break even drivers? identify two important drivers affecting the amount of revenues needed for ventures to break even Explain

Straight supply is a major supplier of medical components

Straight Supply is a major supplier of medical components to large pharmaceutical corporations. Bonnie Straight is a second generation CEO of the company founded by her father forty years ago. Originally established in M ...

A congresswoman introduces a bill to outlaw credit

A Congresswoman introduces a bill to outlaw credit rationing by banks. The bill would require that every applicant be granted a loan, no matter how high the risk that the applicant would not pay back the loan. She defend ...

Gruber corp pays a constant 740 dividend on its stock the

Gruber Corp. pays a constant $7.40 dividend on its stock. The company will maintain this dividend for the next 8 years and will then cease paying dividends forever. The required return on this stock is 12 percent. What i ...

1 discuss the conditions where a multidomestic or regional

1. Discuss the conditions where a multidomestic or regional strategy might perform better than a transnational or international strategy. 2. Explain how global integration and local responsiveness might be successful in ...

On august 20 a stock index futures which expires on

On August 20 a stock index futures, which expires on September 20, was priced at 429.70. The index was at 428.51. The dividend yield was 2.7 percent. Discuss the concept of the implied repo rate on an index arbitrage tra ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen