Question

In: Economics

PART 3 – MARK ANGELO CASE STUDY You are a business development officer of ABC bank....

PART 3 – MARK ANGELO CASE STUDY

You are a business development officer of ABC bank. An existing client of yours told you about Mr Mark Angelo who is presently banking with MMM bank. You were told that Mr Angelo is a very rich and influential client who could be approached to move his business to your bank should you be able to offer him favourable rates. During your initial contact with Mr Angelo he indicated that he is not looking for another banker but that you should provide him with a proposal which he can consider.

  MARK ANGELO

STATEMENT OF FINANCIAL POSITION AS AT 1 SEPTEMBER 20XX

ASSETS

Residential property – Mill Point Rd, South Perth

$ 15 000 000

Holiday home – Dunsborough

$ 5 160 000

Vineyard farm – Margaret River

$ 7 500 000

Investments:

Mark Equipment Pty Ltd - 50% shareholding

$ 1 527 600

Mark Equipment Pty Ltd - loan account

$ 5 325800

Fixed deposit

$ 750 000

Vehicles:

20XX Range Rover

$ 80 000

20XX Mercedes 600 SL

$ 190 000

20XX Porsche

$ 190 000

Household goods, Persian carpets and work of art

   $ 1 000 000

$ 36 723 400

LIABILITIES

Bond on Mill Point Rd, South Perth property

$ 11 500 000

Bond on Dunsborough property

$ 2 500 000

Bond on farm

$ 4 500 000

Instalment sale agreements on vehicles

$ 1 000 000

Overdraft

       $ 50 000

$ 19 550 000

Net asset value

$ 17 173 400

You as a banker identified three types of finance that can be taken over by your bank if he can be convinced to change his bank:

  • Mortgage bonds over his fixed properties
  • Finance (instalment sale agreements) over his vehicles
  • Overdraft facility.

You also identified the residential properties and vineyard farm, the vehicles and the fixed deposit as the most suitable types of collateral. Answer the following questions for each of the three prominent types of collateral identified:

i.              Can the bank easily obtain effective control or custody over the asset?

                ii.             Can the bank realise the asset quickly and with little expense?

                iii.            What is the possibility that the collateral can become worthless?

Complete the table to answer this question. Substantiate your answers with good reasons.

Properties

Vehicles

Fixed deposits

Can the bank easily obtain effective control or custody over the asset?

Can the bank realise the asset quickly and with little expense?

What is the possibility that the collateral can become worthless?

Solutions

Expert Solution

the prority is as follows

1) fixed deposit ( it is the most liquid and least risky asset) hence making it the safest bet as chances of default on it by bank are less and it can easily be liquidated. note: margin requiremnt will be less due to less riskiness say 10%

2)loan account as loans are to be paid first in case of a default and its value is not subject to change like property values it is the 2nd best bet. margin requirements will be more around 10-20%

3)residential property:as it is a residential property which makes it safer than other properties( because no one wants to lose a home delibrately due to emotional attachments) , after subtracting the value of liabiltues from the asset price, and a margin a loan can be given against it as collateral,margin requirements minimum 20%

4)vineyard farm: again its price can be volatike and like residental property as its location is not that good margin requirements will be higher than residential property.

5) prices of carpets etc are subjective to the owner who buys them hence it will have maximum margin requirements


Related Solutions

Switzerland is not a member of the European Union (EU). You are the Business Development Officer...
Switzerland is not a member of the European Union (EU). You are the Business Development Officer (BDO) of a successful medium-size Swiss company that has grown rapidly in recent years. The company has now grown to the point where the owners can no longer supply all the capital needed for further expansion. The owners have asked you to look into the option of the company raising capital in the EU capital markets. You have commenced discussion with banks and investors...
Switzerland is not a member of the European Union (EU). You are the Business Development Officer...
Switzerland is not a member of the European Union (EU). You are the Business Development Officer (BDO) of a successful medium-size Swiss company that has grown rapidly in recent years. The company has now grown to the point where the owners can no longer supply all the capital needed for further expansion. The owners have asked you to look into the option of the company raising capital in the EU capital markets. You have commenced discussion with banks and investors...
After reading chapter 3 and the Case Study, "Sheryl Sandberg - Chief Operating Officer of Facebook",...
After reading chapter 3 and the Case Study, "Sheryl Sandberg - Chief Operating Officer of Facebook", please respond to the following question: What seemed to be Sheryl Sandberg's attitude toward her coworkers when she joined the Facebook team? Also, which level of moral development and global corporate social responsiblity (GCSR" does Facebook seem to be operating on?
Case Study You work as a Change Manger for ABC Company. In this project you are...
Case Study You work as a Change Manger for ABC Company. In this project you are required to demonstrate your skills and knowledge through identifying change requirements and opportunities, developing a change management strategy, and implementing a change management strategy. You can demonstrate evidence of your planning by providing the communication strategy and action plan to ensure consultation and participation, stakeholder analysis, risk treatment action plan, a work breakdown analysis, a responsibility assignment matrix and a project schedule. Read the...
John is the Compliance Officer of ABC bank Limited. He is responsible for meeting with new...
John is the Compliance Officer of ABC bank Limited. He is responsible for meeting with new prospective clients and gathering all required information before the commencement of business relationship. A new client, Peter, was introduced by an existing client Derek. Peter claimed himself as a trader in garment. John went through the ‘Know Your Customer’ (KYC) documents required for the onboarding, explained the bank’s policies and procedures to be followed. He requested Peter to provide all documents by the end...
Seminar in Business Finance: Group Project This group project includes One part: Case Study . Part...
Seminar in Business Finance: Group Project This group project includes One part: Case Study . Part I: We have studied several cases this semester which focus on a common corporate action: merger or acquisition. In your group project please select a recent M&A example, either successful or unsuccessful, recent is defined as having occurred in the last three years. You will be tasked with preparing a case study to explain the details of the corporate action. Specifically what led to...
You are the lending officer for Bank 6/3. A company wants to borrow money and has...
You are the lending officer for Bank 6/3. A company wants to borrow money and has the following assets: building, inventory and fixtures. A. Discuss how to fully protect the loan. B. Discuss what the bank would do if the debtor fails to pay the loan.
Case Study #2: Cultural Considerations—Know Before You Go Note: This case study is based in part...
Case Study #2: Cultural Considerations—Know Before You Go Note: This case study is based in part on the FITT Going Global Workshop: An Introductiono the Cultural Aspects of International Trade tcase study, Beamer and Varner, pp. 216-217 Canadians “Hit the Wall” in China A team of two top executives of a Canadian equipment manufacturer had just arrived in China to negotiate a sale with a local manufacturer who needed new equipment to increase production. The Canadians had never sold in...
Case Study Project – PART I Overview The purpose of the case study project is to...
Case Study Project – PART I Overview The purpose of the case study project is to get you acquainted with the security challenges of a real, complex, messy software product. In class, you will be learning about security ideals,   and best practices. In the case study, you will see how those ideals are applied, or not applied. This case study is designed to help you in two key ways: investigation and co-authorship. The investigative part of this project is to...
CASE STUDY You are a part of the team responsible for planning the Land & Homes...
CASE STUDY You are a part of the team responsible for planning the Land & Homes Group (ASX code – LHM), a property development company, audit engagement for 2020. You are required to gather relevant background information and prepare a report for a meeting with your audit seniors. Assume that this is the first time that the audit will be conducted by your audit firm for this client. Your report must address the following issues: QUESTIONS 1) Based on your...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT