What are the ingredients of financial planning model

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Reference no: EM13521011

1. A broker has advised you not to invest in oil industry stocks because, in her opinion, they are far too risky. She has shown you evidence of how wildly the prices of oil stocks have fluctuated in the recent past. She demonstrated that the standard deviation of oil stocks is very high relative to most stocks. Do you think the broker's advice is sound for a risk averse investor like you? Why or why not?

2. Peter Green bought a $10,000 Honda Civic with 10 percent down and financed the rest with a four-year loan at 8 percent stated annual interest rate, compounded monthly. What is his monthly payment if he starts the payment one month after the purchase?

3. What are the ingredients of financial planning model? Describe each in detail.

4. a. The Klaven Corporation has operating income (EBIT) of $750,000. The company's depreciation expense is $200,000. Klaven is 100 percent equity financed, and it faces a 40 percent tax rate. What is the company's net income? What is its net cash flow?

b. Ritter Corporation's accountants prepared the following financial statements for year-end 20X2. Determine operating cash flow of the company and provide an analysis of the current financial condition of the company.

RITTER CORPORATION
Income Statement
19X2
Revenue	$400
Expenses	250
Depreciation	50
Net Income	$100
Dividends	$50

RITTER CORPORATION
Balance Sheets
December 31
	20X2	20X1
Assets
Current Assets	$150	$100
Net fixed assets	200	100
Total assets	$350	$200

Liabilities and Equity
Current liabilities	$75	$50
Long-term debt	75	0
Stockholders' equity	200	150
Total liabilities and equity	$350	$200

Reference no: EM13521011

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