FINC 355 WEEK 3 DISCUSSIONS: 1. Discuss types of pension and welfare plans that are exempt from ERISA regulations. 2. Discuss implications of using life insurance to fund a qualified plan relative to the incidental death benefit test. 3. Discuss advantages and disadvantages to using a cash balance pension plan for both the employer and employee. FINC 440 WEEK 3 DISCUSSIONS 1. Weighted Average Cost of Capital – What is the WACC for the company that you selected to study during the class?  Make sure that the analysis carefully explains the cost of each of the components of the capital structure. 2.  Beta – What is the Beta of the stock for the company that you selected to study during the class? 3. Managing Earnings – Does the firm that you selected to study during the class appear to manage earnings (i.e., attempt to smooth earnings)?  What evidence can you offer to support the conclusion? 4. Most Important Things Learned – What are the most important things you learned from the study of this week’s readings and assignments? FINC 355 RETIREMENT AND ESTATE PLANNING HOMEWORK 3 1 DIRECTIONS: Here is the Homework #3 Assignment. Use the Homework #3 Answer Sheet for your responses to the questions. When you have completed Homework #3 submit the Answer Sheet to your Homework #3 Assignment Folder. Please submit your Homework #3 in MS Word format with the following file name: LastNameFirstInitial_Homework03AnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_Homework03AnswerSheet.docx. 1-Sherin Blake, owner of Blake Architectural Design, Inc., has hired an actuary to calculate the funding  requirement  for  the  company’s  defined  benefit  plan.  To  make  an  accurate   calculation, the actuary will have to consider a. the estimated retirement age of all employees covered by the plan b. the formula that Sherin chose to use to calculate employee retirement benefits c. interest earnings on the fund d. all of the above e. only a and b 2-Joan Garvey owns Garvey Management, a property management company. Last year, Garvey Management installed a qualified defined benefit plan. A small portion of the plan is invested in real estate. Joan hired Hank Thomas, an actuary, to evaluate the plan on an  annual  basis.  Hank’s  lease  in  his  old  office  space  ran  out,  and  Joan offered to let him occupy an office rent-free  in  one  of  the  buildings  that  is  in  the  qualified  plan’s  portfolio.   This arrangement would be an acceptable transaction under ERISA. a. true b. false 3- A severance pay plan is not treated as a pension plan under ERISA if a. payments do not depend directly or indirectly on retirement of employee b. total  plan  payments  are  less  than  twice  the  employee’s  annual  compensation  the   year immediately before separation from service c. all payments to any employee are generally completed within two years of se ...

1. FINC 355 WEEK 3 DISCUSSIONS:
1. Discuss types of pension and welfare plans that are exempt
from ERISA regulations.
2. Discuss implications of using life insurance to fund a
qualified plan relative to the incidental death benefit test.
3. Discuss advantages and disadvantages to using a cash balance
pension plan for both the employer and employee.
FINC 440 WEEK 3 DISCUSSIONS
1. Weighted Average Cost of Capital –
What is the WACC for the company that you selected to study
during the class? Make sure that the analysis carefully explains
the cost of each of the components of the capital structure.
2. Beta –
What is the Beta of the stock for the company that you selected
to study during the class?
3. Managing Earnings –
Does the firm that you selected to study during the class appear
to manage earnings (i.e., attempt to smooth earnings)? What
evidence can you offer to support the conclusion?
4. Most Important Things Learned –
What are the most important things you learned from the study
of this week’s readings and assignments?

2. FINC 355 RETIREMENT AND ESTATE PLANNING
HOMEWORK 3
1
DIRECTIONS: Here is the Homework #3 Assignment. Use the
Homework #3 Answer
Sheet for your responses to the questions. When you have
completed Homework #3
submit the Answer Sheet to your Homework #3 Assignment
Folder.
Please submit your Homework #3 in MS Word format with the
following file name:
LastNameFirstInitial_Homework03AnswerSheet.docx. For
example, if you name is John
Smith, the file name of your Answer Sheet should be
SmithJ_Homework03AnswerSheet.docx.
1-Sherin Blake, owner of Blake Architectural Design, Inc., has
hired an actuary to calculate the
funding requirement for the company’s defined benefit
plan. To make an accurate
calculation, the actuary will have to consider
a. the estimated retirement age of all employees covered by the
plan
b. the formula that Sherin chose to use to calculate employee
retirement benefits
c. interest earnings on the fund
d. all of the above
e. only a and b

3. 2-Joan Garvey owns Garvey Management, a property
management company. Last year,
Garvey Management installed a qualified defined benefit plan.
A small portion of the plan
is invested in real estate. Joan hired Hank Thomas, an actuary,
to evaluate the plan on
an annual basis. Hank’s lease in his old office space ran
out, and Joan offered to let him
occupy an office rent-free in one of the buildings that is in
the qualified plan’s portfolio.
This arrangement would be an acceptable transaction under
ERISA.
a. true
b. false
3- A severance pay plan is not treated as a pension plan under
ERISA if
a. payments do not depend directly or indirectly on retirement
of employee
b. total plan payments are less than twice the employee’s
annual compensation the
year immediately before separation from service
c. all payments to any employee are generally completed within
two years of separation
from service
d. all of the above
e. only a and b
4- Under the “prudent man” rule, a fiduciary must consider

4. a. diversification of plan portfolio
b. liquidity and current return of the portfolio relative to the
anticipated cash flow
requirements of the plan
c. the projected return of the portfolio relative to the
plan’s funding objectives
FINC 355 RETIREMENT AND ESTATE PLANNING
HOMEWORK 3
2
d. all of the above
e. only a and b
5- Adequate liquidity is one of several specific investment
objectives in a qualified plan. Which
of the following types of assets offers the most liquidity?
a. common stock traded on the stock market
b. real estate
c. equipment leasing
d. long-term debt
e. collectibles
6- Shannon McDougal will retire December 31 of this year.
Shannon has worked for Shamrock

5. Construction for 30 years. During his last 5 years, he earned
$40,000, $47,000, $44,000,
$46,000, and $48,000. Shamrock’s retirement plan uses a
unit credit formula that
awards employees 1.5% for each year of service using a
financial average of the last 3
years. Shannon’s annual benefit will be:
a. $19,500
b. $20,250
c. $20,700
d. $21,150
e. $21,600
7-The IRS caught the plan trustee for Hopper Manufacturing
violating the prohibited transaction
rules. Hopper Manufacturing
a. must pay an initial penalty equal to 5% of the amount
involved
b. must pay a 100% penalty if the transaction is not corrected
within time limits set by
the IRS
c. may face penalties for breach of fiduciary responsibility
d. all of the above
e. only a and b
8-12.9 Walter Graves, owner of Graves Excavating wants to
deposit employer stock in a
qualified individual account plan. The stock is not publicly
traded. Which of the following
is (are) true for Walter?

6. a. ERISA limits such contributions to 10% of fair market value
of the assets
b. employer stock will provide the qualified plan with ample
liquidity
c. Walter could use a profit-sharing plan to accomplish his
objective
d. a and c
e. b and c
9- The “small welfare plan exemption” that exempts an
employer from filing an annual report
applies to welfare plans
FINC 355 RETIREMENT AND ESTATE PLANNING
HOMEWORK 3
3
a. with fewer than 100 participants
b. that are fully insured
c. that are paid out of employer’s general assets
d. all of the above
e. only a and b
10- An employer who wants to reward an employee’s years
of service and contribution to the
company (measured as salary) would use a defined benefit plan
formula based on a
a. flat amount

7. b. flat percentage based on years of service
c. flat percentage based on final average pay
d. flat percentage based on career average pay
e. unit credit formula
11- In a combination plan, retirement benefits are funded with a
combination of
a. whole life policies
b. term life policies
c. assets in a “side fund”
d. a and c
e. b and c
Answer: D
12- Which of the following types of employer plans are exempt
from most or all ERISA
provisions?
a. plans of state, federal, or local governments or governmental
organizations
b. plans of churches, synagogues, or related organizations
c. plans maintained solely to comply with workers’
compensation, unemployment
compensation, or disability insurance laws
d. all of the above
e. none of the above because no employer plans are exempt
from ERISA provisions
13- The retirement plan for Bethel Shalom synagogue must

8. adhere to ERISA reporting and
disclosure rules.
a. true
b. false
FINC 355 RETIREMENT AND ESTATE PLANNING
HOMEWORK 3
4
14- Sarah Tensley, owner of Riverwood Spas, a dealer for
saunas and hot tubs, installed a
qualified retirement plan in her business three years ago.
Sarah’s strength is in public
relations and sales. She says “numbers make me nervous,”
so she has delegated the
handling and investment of the retirement plan to a trustee.
a. Sarah has freed herself from any fiduciary responsibility,
having transferred all of that
responsibility to the plan trustee
b. Sarah should be sure that her liability insurance covers any
liabilities that arise out of
breach of fiduciary responsibility
c. Sarah can reimburse the plan trustee for any losses the trustee
might incur as a

9. result of performing fiduciary duties
d. a and b
e. b and c
15- Harper Engineering, Inc., offers several benefits to
employees. Which of its benefits would
be exempt from the ERISA reporting and disclosure
requirements?
a. Harper pays for life insurance to provide for employee
dependents if the employee
dies
b. Harper gives each employee a small gift worth less than
$5 on St. Patrick’s Day
c. Harper has a scholarship program that pays for employee
tuition for industry-relevant
continuing education, based on the employee passing the course,
out of the
employer’s general assets
d. b and c
e. a and c
16- The duties of fiduciaries include all of the following, except
a. act with the care, skill, prudence, and diligence under the
prevailing circumstances
that a “prudent man” would act in a like capacity
b. select moderate- to high-risk investments that will maximize

10. gains in the plan
c. follow the provisions of the documents governing the plan,
unless inconsistent with
ERISA provisions
d. act for the exclusive purpose of providing benefits to
participants and their
beneficiaries
e. all of the above are duties of fiduciaries
17- Harvest Cannery, Inc., has a number of employee benefits.
Which of the following types of
compensation would be exempt from the reporting and
disclosure requirements of
ERISA?
a. paying ten cents more per hour for those employees working
on the 7-11p.m. shift
b. an onsite first aid center at Harvest
c. an onsite dining facility at Harvest
d. all of the above
e. a and c
FINC 355 RETIREMENT AND ESTATE PLANNING
HOMEWORK 3
5
18- Alternatives to using life insurance in a qualified plan
inclue

11. a. group-term life insurance
b. split dollar life insurance
c. personally owned life insurance
d. all of the above
e. only a and b
19- Advantages of defined benefit plans include all of the
following, except
a. defined benefit plans are easy to design and easy to explain
to employees
b. employees obtain a tax-deferred retirement savings medium
c. retirement benefits at adequate levels can be provided for all
employees regardless
of age
d. benefit levels are guaranteed both by the employer and, for
some plans, by the
PBGC
e. for an older highly compensated employee, a defined benefit
plan will allow the
maximum amount of tax-deferred retirement saving
20- Wheels, a small bike sales and repair shop, has ten
employees, five full-time and five part-
time. Walt Morgan, the owner, can’t afford to provide
many employee benefits, but he
does provide all employees three full-pay sick days a year. He
funds the sick pay out of
his general assets. He also provides his full-time employees
with basic health insurance

12. that has a high deductible to keep costs down. Walt pays an
annual premium for this
insurance out of his general assets. Under ERISA,
a. Walt must file an annual report to the IRS
b. Walt must provide employees with a Summary Plan
Description
c. Walt must do either a or b
d. Walt must do both a and b
e. Walt qualifies for the small welfare plan exemption
FINC 355: RETIREMENT AND ESTATE PLANNING
HOMEWORK #3 ANSWER SHEET
DIRECTIONS: Here is the Homework #3 Answer Sheet that you
should submit to your Homework #3 Assignment Folder.
Please submit your Homework #3 in MS Word format with the
following file name:
LastNameFirstInitial_Homework03AnswerSheet.docx. For
example, if you name is John Smith, the file name of your
Answer Sheet should be
SmithJ_Homework03AnswerSheet.docx.
If you have any questions or comments, please do not hesitate
to contact me.
NAME: _____________________________________
Question Number
Answer
1

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14. 20
1
Comps-
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C_EYURS_EYABC_ROCEENG_ROCEFLR_ROCEFWLT_ROC
EJEC_ROCETTEK_ROCEURS_ROCE20099.25%7.8%8.3%9.0
%4.6%8.5%7.3%-
25.0%6.5%31.7%30.0%24.3%23.6%35.6%Rank1542736762345
120107.73%7.9%9.3%10.3%8.8%8.6%7.3%36.2%-
32.7%12.9%16.8%15.9%17.7%37.4%Rank652134727645312011
7.26%7.2%8.3%9.6%15.7%7.8%9.8%21.0%-
8.2%21.7%18.7%17.8%22.1%-
14.6%Rank6743152362451720127.5%7.6%8.2%9.2%9.6%7.9%
6.3%54.8%-
46.7%17.6%19.8%17.9%22.9%22.4%Rank65321471764523Tota
l19221381216221326161519111256312463754612ABCTTEKFL
RFWLTENGJECURSGrand Total32332923383534Rank by EY -
ROCE3421765Price/Earnings14.614.913.8014.412.7Price/Book
1.83.3212.82.11.90.8Price/Sales0.70.510.30.70.3Price/Cash
Flow11.316.217.74.315.95.820134.4%8.2%9.4%14.38.2%6.3%-
0.83.4%6.5%3.8%43.9%7.2%-
0.025.7%16.4%18.0%2.7%26.6%Rank2014
[TTM]5.4%7.3%7.5%0.27.4%7.4%RankGreat Grand TotalRank
by EY - FCFY - ROCEEV/EBIT Ratio by Sector[Industrial
Services | Engineering & Construction]
R-T: Damodaran, Value Multiples by Sector [ev/ebit(DA) ratio]
list:
http://people.stern.nyu.edu/ADAMODAR/New_Home_Page/data
file/vebitda.html12.5210.4212.52Earnings Yield
[EBIT/EV]ROCE [EBIT/CE]FCF Yield [FCF / MV]Market

15. Value-MV [EBIT * EV/EBIT Ratio]Interest-bearing debt
[ST+LT]Excess Cash [Cash-(Rev * 5%)]Enterprise Value-EV
[MV + Debt - Excess Cash]Capital Employed-CE [Cash + AR +
INV - AP + NFA]
Comps Rank
GrandTotal ABC TTEK FLR FWLT ENG JEC URS 32
33 29 23 38 35 34 Rank by EY-FCFY-ROCE
3 4 2 1 7 6 5