Question
CASE #2: BILL HERNANDEZ Last year, Bill Hernandez won a local 50/50 lottery worth $200,000! While he initially spent some money on a new vehicle
CASE #2: BILL HERNANDEZ Last year, Bill Hernandez won a local 50/50 lottery worth $200,000! While he initially spent some money on a new vehicle and a family trip, Bill decided he wanted to invest some of the other money into the bond market, while putting the rest ($100,000) in short-term (1 year) GIC. Bill enlisted the services of a local investor group, Insider Trading Inc., to invest in various bonds and has been utilizing their services for the last year. However, in talking with some of his friends, Bill is starting to question whether he is getting good investment advice. His two most recent investments are as follows: A $20,000 face value bond, paying interest semi-annually at 8% and maturing in 10 years, with a yield to maturity of 9%. He paid $19,854.22. A $10,000 face value bond, paying interest annually at 10% and maturing in 5 years that cost $9,200. He was told this would get him a rate of return of, at least, 13%. One of Bills closest friends has told him about a company he has recently invested in. After being mostly self-funded, that company is looking to raise capital for an expansion opportunity and will be issuing a number of both preferred and common shares in the coming weeks. The companys financial statements over the last two years can be found in Exhibit 1 & 2, but Bill doesnt know how to interpret them. He is curious about the companys recent performance and their current financial situation. After a good first few years, the company is expected to have a steady growth of 7% over the next several years with this expansion opportunity, according to Bills friend. The preferred shares will pay a dividend of $5 and the required rate of return is 13%. The price of these shares is expected to be $38.50 per share. The common shareholders were paid out a dividend of $3 per share, last year, and expected to be priced at $50 per share. CASE ANALYSIS His GIC investment is set to mature soon, and Bill will have another $100,000 he is looking to invest. He is wondering if he should continue to invest with Insider Trading Inc. or if he should consider investing in the business his friend has told him about? Bill has asked to meet you for coffee. As a Cambrian College business student, he wants your advice as to what he should do! i need the recommendation alternative analysis. for the case study as well as problem of statement
2021 2020 Sales $5,300,000 $4,800,000 Cost of Sales $3,657,000 $3,552,000 Amortization $400,000 $400,000 Net Income Before Taxes $562,000 $174,000 Taxes @ 15% $84,300 $26,100 Net Income $477,700 $147,900
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