The primary source of income for RBI is fees from baseball lessons. Lessons are priced at $70 per hour. Mike has three other coaches who help him provide lessons (Mickey, Mr. Joe, and Joey). His dad, Mickey, works with him now that he is retired. Mr. Joe also coached Mike as a child and now coaches for Mike. Joey who is now retired from the Post Office, taught him how to play baseball, coached him growing up, any is 20 years old, played baseball for Mike growing up and played in college during his freshman year before getting injured. RBI generates $245,000 in gross annual revenue and has the following expenses: Coaching fees to his coaches Utilities Field Maintenance Equipment (balls, etc.) Other Expenses $60,000 $2,500 $7,000 $1,000 $3,000 Mike works 1,500 hours and the other coaches total 2,000 hours. His three coaches work the following number of hours and are paid $30 per hour: Mickey Joey Mr. Joe 1,100 500 400 Mike's coaches have worked with him for at least five years. Mike's net income equals the fees less the expenses listed above. He reports his revenue and expenses on Schedule C of his personal income tax return. Personal and Financial Objectives for Mike and Maria Roman 1. Provide for retirement. They would like to retire when Mike is age 60. They want to plan on $100,000 of retirement income in today's dollars. They expect to receive Social Security and Mike has a pension with Major League Baseball (MLB). They would like to plan on funding potential retirement expenditures until they turn age 95 and would like to maintain the same level of spending, even if Mike or Maria died early. 2. Provide for the cost of Michael's college education. They expect Michael to receive a partial baseball scholarship, but they plan on paying $15,000 per year for each of his five years for college. 3. Establish a retirement plan for the income he earns at RBI. EXTERNAL INFORMATION Economic Information Inflation is expected to be 3.0% annually. There is no state income tax. The yield curve is slightly upward sloping, but relatively flat. The historic and expected correlation between the equity markets in the modernized countries is relatively high. The correlation between these markets increase especially during economic crisis. They have a required rate of return of 9 percent. this The economy is in a steady slow growth expansion phase with moderate unemployment. Chapter 15: Item Sets and the Mike & Maria Roman Case I Bar Ed