ADM 3351 Lecture Notes - Lecture 10: Cash Flow, Latvian Language, Conforming Loan

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pearmoose523

5 Dec 2017

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Originators may generate income for themselves by charging an origination fee. This fee is expressed in terms of points, where each point represents 1% of the borrowed funds. For example, an origination fee of two points on a ,000 mortgage represents ,000. Originators also charge application fees and certain processing fees. Another source of revenue is the profit that might be generated from selling a mortgage at a higher price than it originally cost. The second source of revenue is the profit that might be generated from selling a mortgage at a higher price than it originally cost. If mortgage rates rise, an originator will realize a loss when the mortgages are sold in the secondary market. A potential homeowner who wants to borrow funds to purchase a home will apply for a loan from a mortgage originator and supply financial information used to perform a credit evaluation.

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Your discussion post task for this week is to choose an article from http://perc.org/ and show how an understanding of economics has allowed you to better comprehend the subject at hand. Here's how to do it: Find and attach a working link to one of PERC's many articles. Next, give a four to six sentence summary of the article and how it relates to the economic concepts we have been uncovering throughout the course as a whole. (Here are some of the topics which have been covered, Price, Quantity, Leisure/Labor, SE, IE, Incentives, Price floor, Price ceiling...etc.)

TBT: Paying to Play in National Parks

Next week is National Park Week. To celebrate, the National Park Service is waiving admission fees to all national parks, advocating that this is a week for Americans to discover their national parks and the wonders they contain.

Unfortunately, visitors to national parks are going to find more than herds of buffalo and scenic vistas. With the National Park Service facing nearly $12 billion in deferred maintenance, park guests will also encounter potholes, leaky wastewater systems, and run-down campgrounds. To make matters even worse, not charging an entry fee strips parks of the potential visitor revenues to address these problems.

In 1996, Terry Anderson and Mark Liffman outlined how allowing national parks to charge and retain visitor fees could help parks help themselves in the Chicago Tribune:

A new day is dawning in our national parks. Congress has passed a law allowing the National Park Service to begin a two-year pilot program at 10 designated parks. These parks may charge higher entrance fees and, more importantly, each park will keep 80 percent of the additional revenues it earns.

This change could transform the major parks such as Yellowstone. The crown jewel of our national park system has been tarnished by money problems. This spring, the Park Service delayed the opening of the Beartooth Highway, which brings visitors to the northeast entrance. Then it kept two campgrounds and a museum closed for the summer. And the potholes throughout the park aren't getting any better.

Yellowstone has already taken one tentative step in the direction of higher fees. In 1992 the park introduced fishing fees of $5 for a seven-day permit ($10 for a season pass). Last year, these fees raised $430,000. The money remained in the park and was used to control exotic fish in Yellowstone's streams and rivers and pay for research on whirling disease, which threatens trout in many parts of the West.

Parks like Yellowstone can become self-supporting. The revenues can improve the parks and reduce the burden on taxpayers who do not use the facilities. This combination is surely better for the parks, for the U.S. Treasury, and the millions of visitors enjoying our natural heritage.

If we want to keep the âcrown jewelâ status of our national parks, we need to give parks the tools for success. One such tool to fight the enormous maintenance backlog is to continue to allow park managers to charge recreation fees and use the revenues for maintenance and critical projects.

Before 1996, parks deposited collected recreation fees into the U.S. Treasury and relied on Congress to appropriate funds back to them. Today, the Federal Lands Recreation Enhancement Act (FLREA) allows at least 80 percent of park fees to remain in the park where they were collected.

Fee revenues allow parks to address critical needs without depending entirely on unreliable Congressional funding. Local park managers decide how fee revenues are spent, which is a critical step in breaking the backlog because no one understands the maintenance challenges facing national parks better than the park managers themselves.

Though Congress still provides more than 90 percent of national park funding, the National Park Service has collected more than $2.75 billion through its recreation fee program. In 2014, FLREA funded nearly 1,545 projects in national parks, half of which addressed deferred maintenance and improved facilities.

As we take the next week to appreciate our national parks and the heritage they represent, we must also seek ways to maintain and improve them. Allowing parks to charge and keep visitor fees is a useful tool for polishing our crown jewels.

- See more at http://www.perc.org/blog/tbt-paying-play-national-parks#sthash.k8DVqYsg.dpuf

salmonspider398

Please answer the below questions.I only have 1 hours beforesubmit.Please!

Questions

1. Should the Federal Government question an educationalinstitution on its recruiting practices?

2. Should the Federal Government also question State and PrivateUniversityâs retention practices?

3. Shouldnât these companies be able to operate as a business-that is- making money the aggressive way?

4. Who are the stakeholders in this situation?

What is the ethical dilemma and duty in this matter

For Profit for Education? Putting Profits over PublicGood? Contd...

For-profit colleges in the US came under increased scrutiny onseveral counts. This case study describes the problems faced byâfor-profit collegesâ in the US such as high loandefault rates, vague accreditation standards, and low graduationand job placement rates. Complaints such as overpriced degrees,misleading claims, and increasing level of student debt resulted inthe government turning its attention to the entire for-profitcollege sector. According to some reports, too much taxpayer moneywas being used to generate profits for the colleges, instead ofproviding students with useful high-quality education. The casealso focuses on the alleged fraudulent practices adopted byfor-profit colleges in the US to gain access to more federalfinancial aid.

The Study

Concerned about the disproportionate percentage of federalstudent aid flowing to âfor-profit collegesâ, someanalysts began raising questions about the rapid growth of thefor-profit education sector, the aggressive recruitment ofstudents, and the value of the education provided by suchinstitutions.

There are strategies followed by âfor-profitcollegesâ in the US to attract more students. According toa report released by US Government Accountability Office (GAO),some for-profit colleges in the US were involved in deceptivepractices and had made misleading statements to prospectivestudents which included not providing clear information about thecollege's graduation rate, applicant's likely salary aftergraduation, accreditation of the school, and the duration and costsof the programs offered by the schools. This study concludes bydetailing the new regulations proposed by the federal governmentfor the âfor-profitâ education sector in order to safeguardstudents from misleading recruitment practices and incurring hugedebts, among other issues. This study also focus on studentenrollments and the methods these colleges were adopting to attractmore students.

On release of the GAO report, the shares of for-profit educationcompanies in the US, including Apollo Group Inc. (Apollo Groupâowner of University of Phoenix), DeVry Inc. (DeVry), EducationManagement Corp, and Corinthian Colleges, Inc. (Corinthian), fellsignificantly. "GAO's findings make it disturbingly clear thatabuses in âfor-profitâ recruiting are not limited to a few roguerecruiters or even a few schools with lax oversight.

To the contrary, the evidence points to a problem that issystemic to the for-profit industry,"⁹ said Tom Harkin(Harkin), Chairman, US Senate Health, Education, Labor, andPensions (HELP) Committee.

The GAO defined for-profit colleges as "institutions ofpost-secondary education that are either privately owned or ownedby a public traded company and whose net earnings can benefit ashareholder or individual."...

In May 2010, the GAO began its investigation of 15 for-profitschools in six states (Arizona, California, Florida, Illinois,Pennsylvania, and Texas and Washington, D.C (Refer to Exhibit IIIfor a list of the schools probed)...

High Tuition Fee
The report stated that the tuition fee at for-profit colleges washigh compared to similar programs at other public colleges.Investigators found that on an average, the fee for an associatedegree program was between 6 and 13 times higher at a for-profitschool than at a public college while a bachelor's degree at afor-profit college cost almost twice that in local publicinstitutions...

Deceptive Recruitment and Marketing Tactics
According to the report, campus officials of all 15 colleges misledpotential students and made deceptive statements about theirprograms' cost, quality, and duration, and the average salary ofgraduates (Refer to Exhibit V for some examples of deceptivepractices of for-profit institutions) For-profit colleges generallypaid recruiters by the number of enrollments that theygenerated...

Loan Defaults
For-profit colleges, which accounted for 10% of all collegestudents in the US as of 2009, derived three-fourth of theirrevenues from federal grants and loans. In 2009, at 14 for-profitschools, federal aid totaled 87% of revenue in 2009...

Scenario: Your team has been hired to provide financial analysis for a start-up company, Bobble in Style, which produces customized bobble heads. The bobble heads are made out of less rigid materials and are more true to life than those of competitors.

The company inventors, Mr. and Mrs. Lee, are going to pitch their idea to Shark Tank in a few months, but first they need to have a better understanding of the business financials. The Leeâs are already creating and selling their product from their home-based office and work area. They know what costs are involved with making the bobble heads on a small scale, but they donât have an understanding of financial figures beyond basic costs. They need you to make sense of various financial figures for them. The Project: There are several financial analysis tasks involved with this project, which are outlined below (#1-8). Once you have worked through each task, you will need to produce a PowerPoint presentation to introduce and highlight your findings. Your PowerPoint presentation should include a title slide, an executive summary slide(s), subsequent slides that illustrate your findings, any additional recommendations that you would like to make, and a conclusion slide. The PowerPoint presentation should be approximately 15-25 slides in length. Include notes in the presentation as needed. You will also need to create a written executive summary (one page in length). Your final submission will include the PowerPoint presentation, the executive summary, and an Excel file with relevant calculations.

1. Financial Statements: Develop an Income Statement for 20XX, Cash Flow Statement for 20XX, and Balance Sheet as of the end of 20XX based on the data provided below for year 20XX. All sales are collected when the sale is made and all expenses are paid when the expense is incurred. Explain the purpose of each financial statement. a. Income Statement Data for 20XX: â¢ Units produced and sold = 420 â¢ Sales ($80 per unit selling price) = $33600 â¢ Cost of goods sold ($30 per unit, all variable costs) = $12600 â¢ Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves) â¢ Advertising fees =$2000 â¢ Bank fees = $150 â¢ Phone/internet = $1200 â¢ Shipping ($3 per unit) = $1260 â¢ Utilities = $900 â¢ Office supplies = $800 â¢ Interest expense on note payable = $350 â¢ Depreciation expense (straight line) = $800 â¢ Income tax rate = 26 %

b. Other Financial Data for 20XX: â¢ Proceeds from sale of equipment = $3000. The equipment originally cost $1000 and had accumulated depreciation of $200. â¢ Purchase of equipment = $1600 (The machine is purchased on the last day of 20XX so no depreciation expense is recorded.) â¢ Repayment of note payable = $5000 â¢ Consider any data relevant from the income statement.

c. Balance Sheet Data for Beginning of 20XX: â¢ Cash and cash equivalents = $10000 â¢ Accounts receivable = $0 (Cash is received at time of sale) â¢ Raw materials inventory = $10500 â¢ Equipment = $5000 (This includes the $1000 cost of the equipment sold in 20XX). â¢ Accumulated depreciation = $1,000 (This includes the accumulated depreciation of 200 for the equipment sold in 20XX. â¢ Accounts payable = $0 (Cash is paid at the time of purchase.) â¢ Note payable = $5000 (This is the note payable which is repaid in 20XX) â¢ Common stock = $15000 â¢ Retained earnings = $4500 2. Financial Ratios: Calculate the following financial ratios and explain the meaning of the results.

a. Net Profit Margin

b. Quick Ratio c. Debt-to-Equity Ratio 3. Cost Classification: The Leeâs have provided you with the following costs and relevant information that are assumed for year 20XY. A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.

B. Explain the importance of distinguishing between variable and fixed costs.

C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information. a. Cost of goods sold of $35 per unit b. Labor = $400/month â¢

One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month. c. Advertising fees = $3,000 d. Bank fees = $200 e. Phone/internet = $150 per month f. Shipping = $3 per unit g. Utilities = $100 per month h. Office Supplies = $900 i. Conference Exhibitor Fee = $3000 j. Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200

4. Net Present Value: The Lees are considering adding a new piece of equipment that will speed up the process of building the bobble heads. The cost of the piece of equipment is $42000. It is expected that the new piece of equipment will lead to cash flows of $17000, $29000, and $40000 over the next 3 years. If the appropriate discount rate is 12%, what is the NPV of this investment? Explain the findings.

5. Budget Preparation: The Lees believe that production and sales could double after being on Shark Tank which is scheduled in December of 20XY. They want to be prepared for this. Based on the budgeted income statement calculated above for 20XY, create a new budgeted income for 20XZ assuming that the production and sales is double the level of 20XY

. 6. Incremental Analysis: If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production. They have two options. Option 1 is to rent out a spacious warehouse nearby. If they pursue this option, there rent will be $1200 per month and utilities are estimated to cost an additional $350 per month. Their second option, Option 2, is to rent a smaller storefront space that is also nearby. The storefront rent is $1350 per month. However, utilities will likely only cost an additional $150 per month. They want to compare their options over one yearâs time (since each rental contract is a 1 year commitment). What is the incremental analysis if the Lees choose Option 1 over Option 2?

7. Break-Even Analysis: You have been asked to calculate how many units need to be sold to break even, based on the costs provided in task #3. Assume that only one conference will be attended and the estimated expenses associated with this conference are on target. Use the information in task #3 except do not consider taxes.)

8. Contribution Margin: Based on the Break-Even Analysis just performed, what is the contribution margin per unit and the total contribution margin?

ADM 3351 Lecture Notes - Lecture 10: Cash Flow, Latvian Language, Conforming Loan

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