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Case Study for Winter Term 2017 – FIN 1011
Design and Compile a…
Case Study for Winter Term 2017 – FIN 1011
Design and Compile a Financial Plan
for Betty and Robert Burger
Robert Burger
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sole owner of “Complete Brand Consulting Corporation”, an extremely successful small Canadian qualified corporation.
Robert would like someone to look at their financial affairs and you offered to complete a comprehensive financial plan
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has a salary of
$93,000 per annum (each year).
He feels the business is worth $450,000 if it was sold today (Critical Information)
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Robert pays a monthly total of $1,200 in child support payments.
He will cover 50% of the children’s 4 years of college/university education which currently costs $8,000 a year,
, and these costs are estimated to grow at 5 % per year. Both children will be starting university/college at age 18
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Robert is a risk taker and feels long-term he would like to see a return of 8% on his investments. (Critical information)
Betty Burger
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She informed you that she is also having financial plans completed by competing firms so it is important that you provide a plan that is sufficient to win you their business.
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She had mentioned that she and Robert would like someone to look at their financial affairs and you offered to complete a comprehensive financial plan.
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She has been with the bank for five years and is quite comfortable in her position and feels it is quite secure.
Robert and Betty want your opinion on which mortgage is best for them, why you suggest this is the best mortgage for them, and how this would affect their budget.
Betty gets some great benefits from working at State Capital Bank such as no transaction fees on her bank accounts
lots of benefits (80% dental coverage, family plan included),
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Betty is a member of a non-contributory defined benefit pension plan that will pay her a pension at age 65 of 1.5% of the average of her last 5 years of salary, times the number of years she works with the bank.
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. If she takes her retirement benefits earlier than age 65 she losses 5% per year. (Critical information)
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Betty contributes $5,400 each year to her self-directed RRSP and will continue to do so until she retires.
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mother Marie, Robert’s estranged first wife
William
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He will cover 50% of the children’s 4 years of college/university education which currently costs $8,000 a year, (Robert)
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Cathy
He will cover 50% of the children’s 4 years of college/university education which currently costs $8,000 a year, (Robert)
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Robert pays a monthly total of $1,200 in child support payments.
Betty and Roberts Plan
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Betty and Robert want to start a family over the next couple of years and feel they will need to save $ 6,000 a year for future expenses.
The Burger's Assets
The Burger’s purchased their home in in April 2012 for $325,000
At that time obtained a fixed-rate mortgage of $240,000 at 6.75%.
(5 year term, monthly pay, 25 year amortization, renewal date: April 10, 2017).
They pay $1,648 a month in principal and interest payments
when the mortgage renews at that time the principal owing will be at $220,000.
The principal owing on their last statement was $221,134
The variable mortgage rate fluctuates with the bank prime rate so that it is always .50% (half a percent) less than the prime rate.
The bank prime rate is currently 3.25%. All the above allow 20% of the original balance to be paid on each anniversary date (once a year). Note: For this paper use the rates listed, do not shop for other rates.
A real estate salesperson has told them that their house is now worth $440,000
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Forty percent the home’s value is considered due to the worth of the land and 60% is the replacement cost of the building structure.
Betty contributes $5,400 each year to her self-directed RRSP and will continue to do so until she retires.
Betty and Robert have unused RRSP contribution room of $30,000 and $70,000 respectively.
Robert will continue to make the $20,000 contribution (as a lump sum in February) each year and Betty will continue her monthly contributions at the same rate as this year.
Robert has a new Chrysler 300 (less than a year old) car purchased by his company for
$55,000 and used mostly for business.
He feels its resale value is around $42,000 today. (Critical) Liquid asset
He has
$200,000 in liability insurance
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The Burgers Expenses
Robert will continue to make the $20,000 contribution (as a lump sum in February) each year and Betty will continue her monthly contributions at the same rate as this year.
They pay $1,648 a month in principal and interest payments
He will cover 50% of the children’s 4 years of college/university education which currently costs $8,000 a year,
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, and these costs are estimated to grow at 5 % per year. Both children will be starting university/college at age 18
Betty contributes $5,400 each year to her self-directed RRSP and will continue to do so until she retires.
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The lease costs $800 a month, (Robert's Car) a new Chrysler 300
insurance is another $1,400 a year
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He feels its resale value is around $42,000 today. (Critical)
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Robert has $1,750 outstanding on his VISA (Robert’s VISA is a company card).
The monthly minimum payment on each card if not paid in full each month is 5% per of the outstanding balance.
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