Financial planning questions

1. Betty earns $100,000 working as a part-time lawyer in New Orleans. The company provides a matching contribution in the 401(k) plan of 50% up to a maximum contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it at the beginning of the year. She contributed $15,000 to the plan this year, and the employer made the matching contribution before year-end. The ending balance of the account is $100,000. What is her return on investments this year? 2. Mike Smith has the following financial data. Investment assets at year end $475,000. Investment assets at the beginning of the year $392,000. Savings made during the year by Mike $27,000. Employer match to Mike's 401(k) plan $5,000. Total assets on ending statement of financial position $700,000. Gross income on income statement $100,000. Total assets on beginning statement of financial position $600,000. Total liabilities at beginning of the year $200,000. Total liabilities at year end $180,000. What was Mike's ROA for the year? 3. Pat & Marie have the following expenses and account balances. Pat's annual 401(k) plan contribution $16,500. Pat's annual salary $100,000. Current liabilities $24,000. Housing costs (P&I & T&I) monthly $2,167. Cash & cash equivalents $18,000. Monthly nondiscretionary cash flows $6,000. Monthly debt payments other than housing $500. Pat's employer matches $1 for $1 up to 3% of Pat's salary in his 401(k) plan. Based on the information above, calculate Pat & Marie's housing ratio 1 in numbers. 4. Pat & Marie have the following expenses and account balances. Pat's annual 401(k) plan contribution $16,500. Pat's annual salary $100,000. Current liabilities $24,000. Housing costs (P&I & T&I) monthly $2,167. Cash & cash equivalents $18,000. Monthly nondiscretionary cash flows $6,000. Monthly debt payments other than housing $500. Pat's employer matches $1 for $1 up to 3% of Pat's salary in his 401(k) plan. Their savings rate is? 5. Calculate the IRR of a machine that is purchased for $5,000 sold at the end of year 4 for $2,500, and produces the following cash flows. Year 1 $700. Year 2 $800. Year 3 $900. Year 4 $1000. 6. Bryon & Mandy are married and have a net worth of $20,000 and total assets of $150,000. If their revolving credit and unpaid bills total $8,000, how much are their total liabilities? 7. Anthony has been investing $1,000 at the end of each year for the past 15 years. How much has accumulated, assuming he has earned 10.5% compounded annually on his investment? 8. Ted has been dollar cost averaging in a mutual fund by investing $1,500 at the beginning of every quarter for the past 5 years. He has been earning an average annual compound return of 9% compounded quarterly on this investment. How much is the fund worth today? 9. Lori wants to give her daughter $25,000 in 8 years to start her own business. How much should Lori invest today, at an annual interest rate of 8%, compounded annually, to have $25,000 in 8 years? 10. Tracy & Brett are married with the following financial situation. Current assets $9,243. Current liabilities $6,921. Monthly nondiscretionary expenses $4,693. Annual combined income $70,000. Annual debt payments (excluding monthly housing costs) $22,084. What is Tracy & Brett's current ratio? 11. Pat & Marie have the following expenses and account balances. Pat's annual 401(k) plan contribution $16,500. Pat's annual salary $100,000. Current liabilities $24,000. Housing costs (P&I & T&I) monthly $2,167. Cash & cash equivalents $18,000. Monthly nondiscretionary cash flows $6,000. Monthly debt payments other than housing $500. Pat's employer matches $1 for $1 up to 3% of Pat's salary in his 401(k) plan. Based on the information above, calculate Pat & Marie's emergency fund ratio in numbers. 12. Holly would like to plan for her daughter's college education. She would like for her daughter, who was born today, to attend college for 4 years beginning at age 18. Tuition is currently $10,000 per year, and tuition inflation is 7%. Holly can earn after-tax rate of return of 10%. How much must Holly save at the end of each year if she wants to make the last payment at the beginning of her daughters first year of college? 13. Tracy purchased a car for $19,500. She is financing the purchase at an 11% annual interest rate compounded monthly for 3 years. What is the payment that Tracy is required to make at the end of each month? 14. Calculate the NPV of a machine that is purchased for $5,000, sold at the end of year 4 for $2,500, and produces the following cash flows. Year 1 $700. Year 2 $800. Year 3 $900. Year 4 $1000. Assuming that the appropriate discount rate is 6%, what is the NPV? 15. Cindy invests $20,000 in a limited partnership today. At the end of year 1 & 5, she will receive the after-tax cash flows shown below. The partnership will be liquidated at the end of the fifth year. Cindy is in the 35% federal income bracket. Year 0 -$20,000 CFO Year1 0 CF1 Year 2 $4,000 CF2 Year 3 $6,000 CF3 Year 4 $8,000 CF4 Year 5 $10,000 CF5. The after tax IRR on this investment is: 16. Pat & Marie have the following expenses and account balances. Pat's annual 401(k) plan contribution $16,500. Pat's annual salary $100,000. Current liabilities $24,000. Housing costs (P&I & T&I) monthly $2,167. Cash & cash equivalents $18,000. Monthly nondiscretionary cash flows $6,000. Monthly debt payments other than housing $500. Pat's employer matches $1 for $1 up to 3% of Pat's salary in his 401(k) plan. Based on the information above, calculate Pat & Marie's current ratio in numbers. 17. Judy recently purchased her first home for $220,000. She made a down payment of $20,000 and financed the balance over 15 years at 6% interest. If Judy's first payment is due on October 1st this year, approximately how much of this year's payments will be applied to the outstanding principal? 18. Holly's salary is $100,000 per year. She contributes 12% of her salary to her 401(k) plan. Her employer contributes 5% of her salary to a profit share plan. She also contributes $2,500 per year to an IRA. What is Holly's savings rate? 19. Billy owns one share of Disney stock. He purchased the share 3 years ago for $15. Disney stock is currently trading for $25 per share. The stock has paid the following dividends over the past 3 years: year 1 $1.00; year 2 $2.00; year 3 $3.00. What is the compounded rate of return (IRR) that Billy has earned on his investment? 20. John & Mary, both 45 years old, are married and have one child, age 10. They plan to pay for his college at an in-state university from age 18-23, and they would like to retire at age 62. They have the following financial data and goals. Joint employment income $200,000. John's 401(k) plan contribution $16,500. Mary's IRA contributions $3,000. John's 401(k) employer match $5,000. Annual gifts from John's parents $10,000. Total investment assets $380,000. Total cash & cash equivalents $ 100,000. From the goals & data given, which of the following statements are correct? (Do not make assumptions that are not stated). 1). John & Mary's investment assets to gross pay ratio are adequate for their age. 2). John & Mary's savings rate is appropriate for their goals. 1 only, 2 only, both, neither