Reference no: EM131520723

Assignment

1. You are required to read and analyze the case study and provide thoughtful and well-written ?responses/arguments to the questions at the end of the reading.

2. In order to receive full credit, your responses/arguments to the questions MUST represent your ?understanding from the course materials, supporting information relevant to the questions, key principles and professional examples demonstrating application of the principles, and innovation and creativity in your thoughts based upon theories.

3. Your writing assignment MUST:

. (i) be typed, double-spaced, using Times New Roman font (size 12) ?
. (ii) range from 3-5 pages excluding tittle page and references ?
. (iii) contain relevant references and citations (APA is highly recommended).

4. Below are the grading criteria:

1. Responses to the questions Due Date: Monday, June 5, 2017

Expected Level of Performance Point Value:

- A minimum length of 3- 5 pages. ?
- Discussion is substantive and relates to key principles in finance. ?
- Uses personal/professional examples demonstrating application of ?principles. ?
- Is submitted according to the deadlines in the course schedule. ?
- Language is clear, concise and easy to understand. Uses terminology ?appropriately and is logically organized

Marginal Level of Performance Point Value:

- A minimum length of 3- 5 pages. ?
- Makes reference to key principles, but is not well developed or integrated ?in the response. ?
- Refers to personal/professional examples, but is not well integrated in the ?response. ?
- Submitted according to the deadlines in the course schedule. ?
- Is adequately written, but may use some terms incorrectly; may need to be ?read two or more times to be understood.

Fail Point Value:

- Missed Deadline. ?
- Contains no reference to key principles; if key principles are present, ?there is no evidence the learner understood principles, or key principles ?are not integrated into the response.?
- There is no reference to personal/professional examples. ?
- Poorly written; terms are used incorrectly; cannot comprehend learner's ?ideas after repeated readings.

Case Study: Southern Oregon Injection Molding, Inc. (SOIM)

Mary, the plant manager of Southern Oregon Injection Molding, Inc. (SOIM), is pondering an interesting offer made by the president and majority shareholder, Kenny. Kenny recently turned sixty and is planning a gradual retirement. None of his children are interested in taking over the business and are currently pursuing careers unrelated to the plastics industry, so Kenny has decided to offer his controlling share to Mary.

SOIM began by manufacturing plastic lawn ornaments, including a colorful tropical bird that became a major fad in the 1980s. Pleased and amused by the success of his fanciful product, Kenny added rabbits, skunks, trolls, angels, and garden fairies to the product line. Under Mary's leadership, SOIM has also become an important secondary supplier of plastic housings for speakers, cell phones, calculators, and similar products.

Marry started working at SOIM as a color technician shortly after graduating from Southern Oregon University with a degree in chemical engineering. Within five years, she became the plant manager, a position she has held for the last eight years. Along the way, she has earned an MBA through the evening program at Southern Oregon University.

Because SOIM stock is publicly traded, we can confidently assign a value of $10,000,000 to Kenny's shares. Kenny has stated that he is open to any reasonable plan to finance the purchase.

Questions

1. Mary could probably borrow the money to purchase the shares outright because the shares would serve as collateral and dividends would cover a good part of the loan payments. The interest rate is 7%, and the lender will amortize the loan with a series of equal payments. What are the annual payments if the bank amortizes the loan over five, ten, or twenty years?

2. Repeat Question 1, but assume that Mary makes payments at the beginning of each year.

3. Complete the following amortization schedule for a $10,000,000 loan at 7% with five equal end-of- year payments.

4. Kenny has offered to finance the purchase with a ten-year, interest-only loan. How much is Mary's annual payment? Describe the pattern of payments over the ten years.

5. Assume that Kenny accepts Mary's offer to finance the purchase with a ten-year, interest-only loan. If Kenny can reinvest the interest payments at a rate of 7% per year, how much money will he have at the end of the tenth year?

Explain all the questions carefully and thoroughly.