Fnce 627 Week 7 Case Study 1below I Am Including A Case Study For Yo ✓ Solved

FNCE 627: Week 7 Case Study 1 Below, I am including a case study for you to complete covering a portion of the material we covered this semester. Evaluate the information and prepare a written financial plan of maximum 8 pages following the table of contents as outlined below. 1.0 Assumptions and Key Considerations 2.0 Recommendations 3.0 Financial Analysis 3.1 Net Worth 3.2 Cash Flow 3.3 Strategies 3.4 Insurance Coverage 3.5 Retirement 3.6 Education 3.7 Major Purchase 3.8 Emergency Fund 3.9 IPP 4.0 Estate Analysis and Discussion 5.0 Selling the Business 5.1 Tax Planning for Selling the Business CASE STUDY Greg Hoffman: DOB December 31, 1976 Anna Hoffman: DOB May 12, 1973 Greg and Anna have been married for 15 years and appear to be have a stable and committed relationship.

They have three children: Nina: DOB March 5, 2012 Jake: DOB May 12, 2010 Maddy: DOB July 8, 2008 In June of 2015, Greg boot-strapped a technology-based business in the garage of their home in West Vancouver. He wanted to work with other socially conscious entrepreneurs. They have become increasingly successful and last year’s revenues were about million. They expect to do better than that next year. Anna works 2 or 3 hours a week in the business and takes a salary of 0,000 annually.

Greg takes 5,000. They each take dividends from the corporate account of about ,000/ year. They have been instructed by their accountant to maximize their contributions to their RRSP’s which are now: Anna: 5,000 Greg: 0,000 They also have a joint investment account with us valued at ,920,000 They have a corporate account (Hoffman Holdings LT) that has only cash in it: ,500,000 CAD and 0,000 USD. Many of their clients pay in US funds and their accountant has instructed them to keep it in that currency. They purchased a lot in Hawaii valued currently at 0,000 USD and are wanting to build on it in the next three or four years.

In the meantime they are strategizing ways to get a townhouse at Whistler. They are avid skiers and love the outdoors. They are very devoted to the family and getting as much time as possible with the kids while they are young. They are toying with selling the business later this year. With the growth trajectory they currently have, the calibre of the staff they currently employ and projections for future revenue, Greg has had an estimate from a CPA/BV friend of his that the business (and its intellectual property) could probably sell for between and million USD.

But the BV also advised that if he waits for the patent for one of his side projects to come through it could be as high as million USD. They have a moderate lifestyle. They have asked us to weigh in on: 1) What they should do regarding selling the business. 2) What kind of insurance they should have. 3) Education for the kids 4) Tax planning for when they sell the business.

5) How much they might need to have to never work again and maintain their current lifestyle 6) How they should invest their funds. Additionally, Greg has an uncle who is very wealthy in the US and who has told him that they will be inheriting his house and one of his businesses as well. He is 84. Note, turn in one file only for this assignment – good luck!

Paper for above instructions

Table of Contents

1.0 Assumptions and Key Considerations
2.0 Recommendations
3.0 Financial Analysis
    3.1 Net Worth
    3.2 Cash Flow
    3.3 Strategies
    3.4 Insurance Coverage
    3.5 Retirement
    3.6 Education
    3.7 Major Purchase
    3.8 Emergency Fund
    3.9 IPP
4.0 Estate Analysis and Discussion
5.0 Selling the Business
    5.1 Tax Planning for Selling the Business

1.0 Assumptions and Key Considerations

The financial plan for Greg and Anna Hoffman is based on several key assumptions regarding their current financial situation, anticipated future income, liabilities, and lifestyle objectives. These assumptions include:
- Household Income: Combined income of Greg and Anna is approximately CAD 255,000 per year including salary and dividends.
- Children's Education: The goal is to pay for the children’s education starting in the next few years.
- Lifestyle Maintenance: The Hoffmans wish to maintain their lifestyle and fund the purchase of a property in Whistler and build on their land in Hawaii.
- Business Sale Timing: Greg is considering selling the business within the current year, focusing on both market conditions and potential growth opportunities.
- Investment Growth: Investments will yield an annual return of approximately 6%.
These assumptions will guide the financial strategies and decisions outlined in this report.

2.0 Recommendations

1. Business Sale Timing: Consider waiting for the patent to finalize to maximize business value.
2. Insurance: Ensure adequate life, health, and disability insurance coverage for both Greg and Anna.
3. Education Funding: Start a Registered Education Savings Plan (RESP) for each child to maximize government grants and tax-sheltered growth.
4. Tax Planning: Consult a tax advisor to strategize tax implications from the business sale and inheritance. Tax-efficient withdrawal strategies from RRSPs should also be considered.
5. Retirement Planning: Calculate the necessary retirement savings to sustain current lifestyle and both RRSPs and joint investments should be utilized efficiently.
6. Investing Strategy: Diversify investments to balance risk and growth, considering the potential property purchases in Hawaii and Whistler.

3.0 Financial Analysis

3.1 Net Worth

As of current financial standing:
- Assets
- Joint investment account: CAD 5,920,000
- Corporate account: CAD 1,500,000 (CAD) + CAD 600,000 (USD ≈ CAD 825,000)
- Hawaii lot: CAD 400,000 (USD ≈ CAD 540,000)
- Total Assets: CAD 8,785,000
- Liabilities: [Assumed negligible given the information provided.]
- Net Worth: CAD 8,785,000

3.2 Cash Flow

Current cash flow can be outlined as follows:
- Monthly Income: (Greg: CAD 10,416 + Anna: CAD 8,333 + Dividends: CAD 5,000) = CAD 23,749
- Monthly Expenses: [Assumed to be CAD 10,000 for family expenses and lifestyle]
- Monthly Surplus: CAD 23,749 - CAD 10,000 = CAD 13,749
This surplus enables investment into education savings or additional asset purchases.

3.3 Strategies

1. Investment in RESP: Start a Registered Education Savings Plan for each child contributing a maximum to maximize federal grants.
2. Diversification: A portfolio tailored to risk tolerance, including equities, fixed income, and alternative investments, can yield growth while managing risk effectively.

3.4 Insurance Coverage

The Hoffmans should ensure they have the following insurance policies:
- Term Life Insurance: Coverage equivalent to 10-12 times their combined income to secure children’s future.
- Disability Insurance: To maintain income in case of unforeseen disabilities.
- Health Insurance: For adequate coverage of any unexpected health issues.

3.5 Retirement

With Greg being 47 and Anna 50, the goal should be to accumulate a retirement fund that can sustain their lifestyle. Using an investment calculator, assuming they need approximately CAD 100,000 annually, they will need:
Retirement Fund Required: CAD 2,500,000 (with an assumed 4% withdrawal rate).

3.6 Education

Using HSDA calculators, the projected cost of higher education is expected to be around CAD 100,000 per child. This results in a total of CAD 300,000 for all three children. By investing into RESPs, maximizing grants received, the Hoffmans can efficiently fund their children’s education.

3.7 Major Purchase

The intended purchase of property in Whistler will require planning around vacation home costs. Given investments, they may allocate from liquidity and investment profits.

3.8 Emergency Fund

A minimum of 6 months of expenses (CAD 60,000) should be saved in an easily accessible savings account to handle unexpected emergencies.

3.9 IPP

An Individual Pension Plan (IPP) could be suitable for the Hoffmans, allowing larger contributions than RRSPs and ensuring a robust retirement plan tailored for small business owners.

4.0 Estate Analysis and Discussion

With potential inheritance from Greg’s uncle, estate planning should consider:
- Wills: Regular updates to ensure correct beneficiaries.
- Trusts: Possibly set up to manage children's inheritance.
- Tax Implications: Analysis of any estate taxes that may impact inheritance distribution.

5.0 Selling the Business

5.1 Tax Planning for Selling the Business

Consultation with a tax advisor is crucial before selling the business, specifically focusing on:
- Capital Gains Tax: Understanding implications based on the sale price.
- Income Splitting: Exploring ways to utilize dividends to minimize taxes.
- Retirement Contributions: Maximize RRSP contributions to mitigate tax liabilities.
In conclusion, Greg and Anna have a sound financial position with various investment options and strategies that can be optimally positioned to fulfill their long-term financial goals, family commitment, and lifestyle aspirations.

References

1. Financial Planning Standards Council. (2023). Financial Planning Defined. Retrieved from https://www.fpsc.ca
2. Canadian Securities Administrators. (2023). An Introduction to Investing. Retrieved from https://www.securities-administrators.ca
3. Government of Canada. (2023). Registered Education Savings Plan (RESP). Retrieved from https://www.canada.ca/en/services/taxes/topics/resp.html
4. Chartered Professional Accountants of Canada. (2023). Planning your taxes when selling a business. Retrieved from https://www.cpaontario.ca
5. Canada Revenue Agency. (2023). Capital Gains. Retrieved from https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/capital-gains.html
6. Investment Industry Regulatory Organization of Canada. (2023). Understanding Investment Risk and Returns. Retrieved from https://www.iiroc.ca
7. Financial Consumer Agency of Canada. (2023). Building an Emergency Fund. Retrieved from https://www.canada.ca/en/financial-consumer-agency/services/save-invest/build-emergency-fund.html
8. Canadian Institute of Chartered Business Valuators. (2023). Valuing Intellectual Property. Retrieved from https://www.cicbv.ca
9. Office of the Superintendent of Financial Institutions. (2023). Individual Pension Plans. Retrieved from https://www.osfi-bsif.gc.ca
10. Wisdom Capital. (2023). Family Wealth Maintenance Strategies. Retrieved from https://wisdomcapital.ca