PFIN 5th Edition by Randall Billingsley,Lawrence Gitman,Michael Joehnk

Exercise 1

Deciding if additional life insurance is needed and, if so, appropriate type. Use Worksheet 8.1. Arthur Beckman, 45, is a recently divorced father of twochildren, ages 10 and 7. He currently earns $95,000 a year as an operationsmanager for a utility company. The divorce settlement requires him topay $1,500 a month in child support and $400 a month in alimony to hisex-wife. She currently earns $35,000 a year as a schoolteacher. Arthur isnow renting an apartment, and the divorce settlement left him with about $100,000 in savings and retirement benefits. His employer provides a $75,000 life insurance policy. Arthur's ex-wife is currently the beneficiarylisted on the policy. What advice would you give to Arthur? What factorsshould he consider in deciding whether to buy additional life insurance atthis point in his life? If he does need additional life insurance, what type ofpolicy or policies should he buy? Use Worksheet 8.1 to help answer thesequestions for Arthur.