Case summary:
Company S hired Person X. Person X accepted the job because he felt that the company had a good potential growth. At the end of the first day, Person C met Person X and introduced him to the 401(k) plan. It is a retirement plan that the companies offer to their employees.
The employee has to contribute money from his pre-tax income to the 401(k) plan. The company would also contribute a maximum of 5 percent of the salary to the plan. The plan has the following options for investments:
- 1. Investment in company stock
- 2. Investment in B “S and P” 500 index fund
- 3. Investment in B small-cap fund
- 4. Investment in B large-company stocks fund
- 5. Investment in B Bond fund
- 6. Investment in B money market fund
Characters in the case:
- Company S: The recruiter
- Person X: The new employee
- Person C: The employee of Company S working in Finance section of the company
To discuss: The B small-cap fund.
Introduction:
Mutual fund refers to the investment in a group or portfolio of assets. The B small-cap fund is a mutual fund that consists of small company stocks.
Want to see the full answer?
Check out a sample textbook solutionChapter 12 Solutions
Fundamentals of Corporate Finance
- Suppose that you are in the fall of your senior year and are faced with the choice of either getting a job when you graduate or going to law school. Of course, your choice is not purely financial. However, to make an informed decision you would like to know the financial implications of the two alternatives. Let's assume that your alternatives are as follows: If you take the "get a job" route you expect to start off with a salary of $40,000 per year. There is no way to predict what will happen in the future, your best guess is that your salary will grow at 5 percent per year until you retire in 45 years. As a law student, you will be paying $25,000 per year tuition for each of the 3 years you are in graduate school. However, you can then expect a job with a starting salary of $75,000 per year. Moreover, you expect your salary to grow by 7 percent per year until you retire 39 years later. Clearly, your total expected lifetime salary will be higher if you become a…arrow_forwardConsider the following scenario in relation to your Notary, Loan Signing Agent and Marriage officiant practice in Hawaii and determine the opportunity cost of leaving your job to become an entrepreneur. You currently make $90,000 per year at your job plus benefits (equal to 30% of your salary). On January 1 of the New Year, you start your own business. After the first year, your accountant informs you that you made $45,000 and out of that you paid $6,000 for health insurance. What was your opportunity cost? If your opportunity cost is higher than you would like, how can you lower your opportunity cost in the future years?arrow_forwardAnswer the following: You are contemplating a job offer with an advertising agency where you will make 54,000 in your first year of employment. Alternatively, you can begin to work with your father's business where you will earn an annual salary of 38,000. 1. Where will you work? a. Advertising agency b. Fathers business c. I choose not to work 2. If you choose to work where you will earn most, what is the opportunity cost? a. 54,000 b. 38,000 3. What is the differential revenue?a. 54,000 b. 38,000 c. 16,000arrow_forward
- You are elated to have landed the summer job of your dreams as an accounting intern with Wheaton Corporation, a company providing fertilizer and farm products to Canadian farmers. Your supervisor and mentor, Mr. B. Kount, greets you with a tough assignment on your first day of work. He handed over a sheet containing some hastily scribbled notes and a comment, “I wish to start you off with something light and easy. Here are some notes on our pension fund operations for 2017. Could you please sort this out by the end of the day? And did I tell you our firm is currently with ASPE but considering a switch to IFRS in 2021.” The note contained the following information: Beginning projected benefit obligation (PBO), $568,000.The plan is underfunded by 60% of this amount and the regulatory agencies consider this to be quite heavily underfunded. Past service costs were recorded on January 1, 2017(? To be determined by the Intern). The current service costs for 2017 amounted to…arrow_forward(Comprehensive Problem) Suppose that you are in the fall of your senior year and are faced with the choice of either getting a job when you graduate or going to law school. Of course, your choice is not purely financial. However, to make an informed decision you would like to know the financial implications of the two alternatives. Let's assume that your alternatives are as follows: If you take the "get a job" route you expect to start off with a salary of $45,000 per year. There is no way to predict what will happen in the future, your best guess is that your salary will grow at 5 percent per year until you retire in 41 years. As a law student, you will be paying $25,000 per year tuition for each of the 3 years you are in graduate school. However, you can then expect a job with a starting salary of $70,000 per year. Moreover, you expect your salary to grow by 9 percent per year until you retire 36 years later. Clearly, your total expected lifetime salary will be higher if you become a…arrow_forwardTwo different questions..arrow_forward
- please make sure to box final answer for each part. the values that are put in are wrong...arrow_forwarduppose that you are in the fall of your senior year and are faced with the choice of either getting a job when you graduate or going to law school. Of course, your choice is not purely financial. However, to make an informed decision you would like to know the financial implications of the two alternatives. Let's assume that your alternatives are as follows: If you take the "get a job" route you expect to start off with a salary of $45,000 per year. There is no way to predict what will happen in the future, your best guess is that your salary will grow at 5 percent per year until you retire in 43 years. As a law student, you will be paying $20,000 per year tuition for each of the 3 years you are in graduate school. However, you can then expect a job with a starting salary of $75,000 per year. Moreover, you expect your salary to grow by 8 percent per year until you retire 36 years later. Clearly, your total expected lifetime salary will be higher if you become a…arrow_forwardDr. Helen Brown is the sister of one of your old high school teachers. You have been given her email address by someone who thinks she might have advice for you during your job search. Please ‘send’ her an email introducing yourself and asking for help. I'm looking for a current job in accounting.arrow_forward
- I just need help with part D.arrow_forwardCase Given: Maysum decided to start a printing company called, Maysum Inc. This company was his dream job and he saved up $30 000 to start the company therefore he didn't need a loan from the bank. Maysum did his first job for $300 to customer Mantao. Mantao paid him $200 and the rest on account. Maysum was running out of supplies so he had to buy pens, notebooks, paper etc for $500. He decided that he should pay his rent for $200 and gas for $100. Maysum was getting really busy and needed to buy a computer. He paid $500 for an Acer laptop on account. He received a call from Mantao who told him she sent him the money she owed him. Maysum is doing really well and decided to buy another store to continue his printing business. The store costs $5000. He needed a loan from the bank to purchase this store. After receiving the loan he decided to pay off the Acer laptop. Prepare 3 financial statements and determine if Maysum is making money. To do: You are going to make up the ledger accounts…arrow_forwardChandler just got a job at Acme Corporate working in the IT area. His salary will be $55,000 to start and could jump to $65,000 within 18 months. His company has a retirement plan (401(k)), but doesn’t provide a match. He’s not sure if he should sign up for the retirement plan from work, learn about Roth IRAs or just wait until he’s older. What do you suggest and why?arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning