SWOT ANALYSIS QUESTIONS

Shelly and Alan are both 38 years old. They are non-smokers and have 2 young children, Brandon (8) and Ally (6). They have recently switched financial institutions to renew their mortgage and as a special bonus have been offered a free financial plan. The Financial Planner has met with the couple and collected the following information: Description Assets Liabilities Income Expenses/Payments Annual Earnings $145,000 Shelly $85M + Alan $60M *assume an income tax rate of 30% Home $550,000 Mortgage $350,000 $1,840/mo Heat/Hydro/Taxes $700/mo Cars (2) $35,000 Car loan $15,000 $450/mo Savings Account $2,500 (joint) Shelly's RRSP $25,000 (contributing $2,000/yr) Alan's RRSP $40,000 (contributing $4,000/yr) Group life insurance policies $145,000 Shelly $85M, Alan $60M (spouse is beneficiary for both) Credit card Low interest rate credit card (12%) with a limit of $12,000) $5,000 owing Minimum payment is 5% / mo General Expenses Groceries/ Drug Store $600/mo Children's activities, travel clothing $8,000/yr

Question #1 Assess Shelly and Alan's current financial situation using all applicable financial formulas and ratios, the complete a SWOT analysis to determine their financial strengths, weaknesses, opportunities, and threats.

Question #2 Shelly and Alan have recently lost a close friend in a car accident. They feel so sad to see their friend's wife left struggling to raise and provide for her 2 children all alone. Shelly and Alan have given some thought to the family's financial affairs should one or both of them unexpected pass away. Their wishes include: that if one spouse dies the family remains in the home, $140,000 is required for the children's post secondary education, if one spouse passed away the other would need supplemental income equivalent to 50% of the other spouse's gross income until Ally completed a post secondary degree at age 22. If they both passed away Alan's sister would become the children's guardian, would take them into her home and would require annual income of $20,000 each until Ally completed a post secondary degree at 22. Shelly and Alan would like the team to assess the amount of life insurance they would need if: 1) Shelly passed away 2) Alan passed away and 3) both pass away. *make and state any assumptions (ie. Interest earned - inflation) and ignore estate taxes

Question #3 Provide 2 options of how Shelly & Alan could use their monthly surplus cash to address any of the weaknesses, opportunities or threats identified. Provide rationale for each option and how it addresses a gap or capitalizes on an opportunity, state any information/questions you may have of the clients and clarify next steps.

+ 75% High-school dropout rates and performance at graduation by score at entrance exam Grade at entrance exam Percent that dropped out from Score on the final exam at - cutoff score for admission high school end of high school 50 0 0 62 elite schools Admitted in 0.53 0.45 51.0 0.50 4810 0 30 0.20 Not admitted in elite schools 42 5 0.25 0.17 45.0 011 Source: Adapted from the analysis of de lanwry, Dustan, Sadoulet (b) Draw two regression lines (Excel commands: Chart, Add linear trend line in Excel, Display equation on graph) separately for the points above the cutoff score (i.e., for those admitted to the elite schools) and for those below the cutoff score (i.e., not admitted to elite schools). Measure the "discontinuity" that you observe at the limit at the point where students were just admitted, i.e., the vertical difference in the two trend lines evaluated at the cutoff. (c) Explain why this may be a credible measure of the causal impact of attending an elite school on the risk of not graduating from high school. In what sense is it a "local" treatment effect? What are some of the factors that might lead to a different impact for students with entrance exam scores far above the cutoff? (d) Repeat the analysis as in question (1b) using the score on the final exam at the end of high school as the dependent variable. Report the impact of attending an elite school on final exam scores at the end of high school. (e) Discuss the trade-off faced by students upon deciding whether to attend an elite school. (f) What is the condition for the validity of this method, and what does this imply about the characteristics of individuals around the cutoff? Discuss what data would you need to have to test that this condition applies and what analysis would you do to support it. Report your results using two graphs: one for the graduation rate and the other for the score on the final exam at the end of high school