BAO2441: Personal Financial Planning - Danielle Case Study - Personal Financial Planning Case Study Assignment Help

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Personal Financial Planning Case Study Assignment Help

TASK Danielle is a 34 year old single mother of two children. Her children, Kane and Abel are 3 and 4 years old, respectively. She has been working for Ford on their assembly line, fitting transmission parts for the past 10 years. She is very concerned about the closure of Ford’s production plant and what this will mean for her financial future. Therefore, Danielle contacts you with a view to having a financial plan created for her. Your task is to analyse information and to provide advice to Danielle in several areas of financial planning. Data will be provided to you as you proceed through the case study. Please be careful and ensure that you highlight all relevant information that comes to hand. QUESTION 1

1. As you sit down to meet with Danielle, you provide her with two questionnaires to fill out. Explain the kind of information she will provide you with (at least 3 types), and why it is important to extract this information at the beginning.
2. Explain why your statement of advice (financial plan) needs to contain a disclaimer, a PDS (if your company sells financial products), and a schedule of fees.
3. List and explain two reasons why financial planning is gaining importance.
4. Draw and briefly interpret a graph showing the life cycle theory of consumption and saving.

QUESTION 2 Danielle does not understand how much insurance she will need to fully protect her in the event that something goes wrong. She mentions that if she passes away, her friend would be willing to move into her house and raise her children. Danielle also tells you that her children frequently experience breathing problems. She has tried to attend the emergency department at her local hospital but after waiting for over 4 hours, has left without speaking to a doctor. Both of Danielle’s parents had heart disease, but this was not discovered until after their deaths. The following table outlines Danielle’s current and expected expenditure obligations: Explain the types of insurances that Danielle and her children would need in her situation, based on the information she has given to you. Don’t forget to mention why these are important for her specifically. Use the needs approach to calculate a sum of life cover she would require. QUESTION 3 Danielle had been renting out a beach bathing box in Werribee South. She had originally purchased it for $68,000 in 2006, and sold it two months ago for $91,000. During this financial year, she has earned $8,000 in rental income. She previously had an investment loan of $50,000 for this bathing box, but has now paid this debt off using some of the money she received from the sale. The following are her expenses from this investment over the current financial year.   Danielle also provides you with the following information over the current financial year. Danielle’s children have $20,000 each, invested in their own names. This is currently in a term deposit account, earning 3.5% p.a. She claims that she does not understand taxation law and has previously neglected to claim any deductions. Calculate Danielle’s tax obligation for the current financial year. What type of gearing did she undertake, and explain its impact on both her tax payable and her cash flow. Calculate the amount of tax Danielle will need to pay separately on behalf of her children, and advise how she could navigate around this problem in future. QUESTION 4 After selling her investment property and paying off its mortgage, Danielle has $80,000 of CBA and ANZ shares, $69,000 cash in her bank account, and A-REIT units worth $60,000. Comment on her portfolio and suggest what she could do to reduce her exposure to risk. Danielle is concerned about her job but she enjoys taking risks. She asks you to research an investment in Clive Palmer’s Titanic 2, and is willing to use cash from her bank account to fund it. You find that she can afford to invest $50,000 now. Due to intense interest from wealthy nostalgic travellers, substantial cash flows from this investment after construction finishes would be $25,000 per year at the end of years 4 and 5. Further cash flows would be $10,000 per year at the end of years 6, 7 and 8. Interest from travellers in this ship would be expected to diminish and she would likely sell her stake in the investment for $20,000 at the end of year 8. She would be happy to earn a before-tax return of 6% p.a. Calculate the net present value (NPV) of this investment Due to another of Clive Palmer’s companies going into administration, you suggest that Danielle should demand 20% p.a. Calculate an alternative NPV at this higher discount rate. Calculate the Internal Rate of return (IRR). If Danielle shares your concerns about Clive Palmer’s credibility, but is willing to compromise at a rate of return at least 15%, should she proceed with this investment? QUESTION 5 Danielle can’t help being worried about her impending retrenchment from Ford. You raise the possibility of her receiving assistance from Centrelink. She responds positively to this by saying: “I wouldn’t mind being at home with my kids at least until the youngest one starts school. At least I wouldn’t need to keep finding people to constantly look after them” What type of Centrelink payments could Danielle be eligible for, and which would be most suitable given her circumstances? Use the Income Test to determine her likely future pension after being made redundant at Ford and after any applicable insurance expires. The following table shows applicable Use the assets test, given information from Part B to calculate an alternative payment amount. Which one would be awarded by Centrelink?Given Danielle’s likely investment, work, and Centrelink income next year, how likely is she to be able to maintain her residential mortgage repayments? What other options could she pursue to keep the family home? Use the assets test, given information from Part B to calculate an alternative payment amount. Which one would be awarded by Centrelink? Given Danielle’s likely investment, work, and Centrelink income next year, how likely is she to be able to maintain her residential mortgage repayments? What other options could she pursue to keep the family home?