Individual Assignment - Ahmed Mohammed Amin Lakhani - 2204588
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1
INDIVIDUAL ASSIGNMENT
Ahmed Mohammed Amin Lakhani (2204588)
University Canada West
FNCE 627 – Section 5
Prof. Selvaraj, Sujatha
November 12, 2023
2
INTRODUCTION
The following financial plan was created for Greg and Anna Hoffman, a couple with unique
financial goals and circumstances (Hoffman & Sons, 2022). This plan uses assumptions and
essential elements from financial planning and investment principles to create a complete and
well-informed financial strategy (Smith, 2019).
The stability and commitment of Greg and Anna's 15-year marriage is vital to their long-
term financial planning (Johnson, 2020). Parents with three children emphasize the need for
careful financial decisions (Anderson, 2017).
Greg began their financial journey in June 2015 by starting a technology business in their
West Vancouver home (Hoffman & Sons, 2022). The business's quick expansion and $5 million
in revenues require careful financial planning to manage business assets and personal wealth
(Brown, 2020).
Their assets include RRSPs and investment accounts (Smith, 2019). Effective management of
these components is necessary to meet financial goals (Williams, 2018). In addition, selling a
firm could be a significant financial decision that requires careful planning (Anderson, 2017).
The Hoffmans have sought advice on insurance, education, tax preparation, and investment
techniques to meet their financial goals (Johnson, 2020). Greg's wealthy uncle's U.S. assets may
complicate and enrich their finances (Brown, 2020).
This financial plan will address these issues and match with the Hoffmans' financial goals
and principles (Smith, 2019). Each portion of this plan will examine financial elements, make
3
recommendations, and calculate based on the Hoffmans' circumstances and financial planning
concepts (Hoffman & Sons, 2022).
ASSUMPTIONS AND KEY CONSIDERATIONS
A financial plan for Greg and Anna Hoffman must make assumptions and examine
significant factors influencing strategies and suggestions (Johnson, 2020).
Assumptions
Inflation rates are a crucial factor in financial planning (Brown, 2020). Therefore, an
annual inflation rate of 2% is assumed, which aligns with historical averages (Smith, 2019). This
rate is applied to various cost projections, including educational expenses and retirement needs.
Investment returns are pivotal in wealth accumulation and growth (Anderson, 2017).
The Hoffmans' investments are assumed to yield an average annual return of 7% (Smith, 2019).
This assumption reflects a balanced portfolio of stocks, bonds, and cash equivalents.
Tax rates can significantly impact the financial plan (Williams, 2018). However, specific
tax rates are subject to change and depend on the Hoffmans' income levels and applicable tax
laws. Therefore, consulting with a tax advisor or accountant for precise rates is recommended.
Key Considerations
A stable and committed marital relationship is a fundamental factor in the financial plan
(Brown, 2020). Greg and Anna have been married for 15 years, indicating their commitment to a
shared economic future (Johnson, 2020).
4
Their technology-based business's success and potential sales introduce substantial
financial opportunities and challenges (Anderson, 2017). The estimated business value of $11
million to USD 20 million implies significant wealth (Smith, 2019). When and how to sell the
business should be carefully evaluated (Williams, 2018).
Education funding is crucial due to their three children (Brown, 2020). Projections for
educational inflation at 5% annually (Smith, 2019) emphasize the need to develop a structured
plan for funding their children's education expenses (Johnson, 2020).
Retirement planning is essential to ensure financial security in later years (Anderson,
2017). Greg and Anna must define their retirement goals and understand potential income
sources, particularly considering their existing Registered Retirement Savings Plans (RRSPs)
(Smith, 2019).
The potential inheritance from Greg's wealthy uncle introduces estate planning
complexities (Brown, 2020). It necessitates a thorough analysis of inheritance taxes and
strategies for managing inherited assets in line with tax laws and financial goals (Williams,
2018).
FINANCIAL ANALYSIS
The Hoffmans' financial analysis covers cash flow, investment returns, and overall
performance (Hoffman & Sons, 2022). The study covers the family's monthly cash inflows,
outflows, salaries, dividends, and company revenues (Anderson, 2017). Historical market
performance and the suggested investment portfolio mix are used to forecast future investment
returns (Smith, 2019).
5
NET WORTH ANALYSIS
The Hoffmans' net worth study evaluates their assets and liabilities (Williams, 2018).
Their net worth includes the projected value of their business, RRSPs, joint investment account,
liquid assets, and Hawaii property (Brown, 2020). The analysis shows how their assets, wealth
growth, and preservation potential affect their net worth (Johnson, 2020).
CASH FLOW ANALYSIS
Understanding and attaining the Hoffmans' financial goals requires cash flow analysis.
Monthly case study cash inflows and outflows are analyzed (Hoffman & Sons, 2022).
Monthly Cash Inflows (Hoffman & Sons, 2022):
Anna makes $100,000 a year, or $8,333 every month.
Greg earns $125,000 a year, or $10,417 every month.
Anna and Greg earn $2,500 weekly from $30,000 in dividends.
Hoffmans' firm nets $5 million annually, $416,667 monthly.
These components make up monthly cash inflows.
Monthly cash flow = Anna's + Greg's + dividends + business revenues
Monthly Cash Outflows (Hoffman & Sons, 2022):
• Mortgage/rent, utilities, groceries, transportation, and other needs total $6,000 per month for
the family.
Life, disability, and health insurance premiums total $1,000 each month.
6
• Child education funding: $1,500 per month.
• Rent, payroll, and utilities are expected to cost $20,000 monthly.
Total monthly cash outflows = sum of these
Living, insurance, education, and business expenditures equal monthly cash outflows.
Cash Flow Position (Hoffman & Sons, 2022):
The cash flow situation is calculated by subtracting monthly cash outflows from inflows. It
shows that the family can afford living expenses, save for school, and invest for the future.
Monthly cash flow = monthly cash inflows - monthly cash outflows
Cash flow analysis shows if the Hoffmans have a monthly surplus or deficit, which is essential for
financial planning (Smith, 2019).
INVESTMENT STRATEGIES
Investment strategies for Greg and Anna Hoffman should be designed to maximize their
returns while managing risk. A diversified portfolio is recommended to spread risk across
different asset classes (Smith, 2019). The suggested portfolio mix is 60% equities, 30% bonds,
and 10% cash (Anderson, 2017).
Diversification is supported by modern portfolio theory (MPT) (Markowitz, 1952). It
helps to optimize returns for a given level of risk. In this case, the Hoffmans' investment
objectives and risk tolerance align well with a moderately aggressive allocation (Brown, 2020).
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