Expert answer:Business Proposal Project Provide $65,000 of withd
Answer & Explanation:Directions
Review the Project criteria below.
Project Description
You are a managing partner of a prestigious investment counseling firm that
specializes in individual rather than institutional accounts. The firm
has developed a national reputation for its ability to blend modern portfolio
theory and traditional portfolio methods. You have written a number of
articles on portfolio management and you are considered an authority on the
subject of establishing investment policies and programs for individual clients
tailored to their particular circumstances and needs.
Dr. and Mrs. A.J. Mason have been referred to your firm and to you in
particular. At your first meeting on August 1, 2012, Dr. Mason explained
that he is an electrical engineer and long-time professor at a local
university. He is also an inventor and, after 30 years of teaching, the
right to one of his patented inventions has just been acquired by a new
electronics company, ACS, Inc.
In anticipation of the potential value of his invention, Dr. Mason has
followed his accountant’s advice and established a private corporation, wholly
owned by the Masons to hold the title to the patented invention. It
was this private corporation that sold the right to Dr. Mason’s invention to ACS,
Inc. ACS, Inc. has agreed to pay $1 million in cash, payable at the
closing on September 30, 2012, for the right to Dr. Mason’s invention. In
addition, ACS, Inc. has agreed to pay royalties to Dr. Mason’s private
corporation on its sales of systems that utilize the invention.
While all parties are optimistic about prospects for success, they are also
mindful of the risks associated with any new firm, especially those exposed to
the technological obsolescence of the electronics industry. The
management of ACS, Inc. has indicated to Dr. Mason that he might expect
royalties of as much as $100,000 in the first year of production and maximum
royalties of as much as $500,000 annually thereafter.
During your counseling meeting Mrs. Mason expressed concern for the proper
investment of the $1 million initial payment. She pointed out that Dr.
Mason has invested all of their savings into his inventions. Thus, they
will have only their Social Security retirement benefits and a small pension
from the local university to provide for their retirement. Dr. Mason will
be 65 at September 30, 2013. His salary from the local university is
currently $55,000 per year and he does not expect this amount to change between
now and his planned retirement on his 65th birthday. After retirement Dr.
Mason expects to continue earning $10,000 – $25,000 annually from consulting
and speaking engagements. The expected Social Security
benefits are expected to be $1,800 per month beginning in October, 2013 and the
annual pension from the local university is expected to be $15,000 per year
beginning at the same time.
Assuming the royalty payments from ACS, Inc. are equal to $100,000 in the
first year and an average of $300,000 per year thereafter, the Masons are
planning to help with the education of their six grandchildren. The
grandchildren range in age from 8 to 12 years old. In addition, the
Masons wish to establish a scholarship fund in the name of Dr. Mason at the
local university that would provide $5,000 per year to one selected electrical
engineering student. This scholarship should be self- sustaining with its
own investments.
Both Dr. and Mrs. Mason have strongly indicated during the first appointment
that they are conservative investors and want a minimum risk of any losses.
Project Requirements
You are to present a proposal that specifically meets the retirement
investment objectives of the Masons listed below. Your proposal should be from
4 – 6 pages double spaced, Times Roman 12 pt. (I prefer Calibri but your
choice, just be consistent). In addition, you should include a cover page
and a separate list of any references used in preparing the proposal. The
proposal must follow APA rules in structure and presentation.
Dr. & Mrs. Mason’s Retirement Investment Objectives
Provide
$65,000 of withdrawals from the investment account each year. This amount
will be in addition to the university pension and Social Security received
each year.
Minimize
income tax (Federal is assumed, but analysis of a preferred state income
tax would be extra).
Include at
least three types of investments in any portfolio constructions.
Provide
for active management of the portfolio with an annual fee of 1% – 1 ½% of
value in the investment portfolio.
Provide an
annual growth after all withdrawals and fees of 4% – 5%.
Provide
funding for the six grandchildren’s education that will total $40,000 each
when they reach the age of 18. Indicate recommended investment
type and account registration.
Provide
for a continuing scholarship at the local university in the amount of
$5,000 per year.
Project Submission
Submit the your findings in a report of four to six pages (not including the
title page or the reference section) as a Microsoft Word document,
double-spaced. Your report should be your own—original and free from plagiarism.
Make sure to follow current established APA.
Project Notes
The important thing to note is that I
am looking for quality of analysis, clarity of organization and accuracy of
conclusions. Also, please take
care to ensure the style of your report – Grammar, Spelling, use of graphics,
etc., is commensurate with an MBA-level report. Be concise and deductive with your statements, and don’t just utilize a
bunch of terms for impact purposes. The length of your report will not
impact your grade unless it is too short to cover the requirements or too long
without purpose.
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