3 Estimating Net Worth Mia has 3000 in assets a finance comp

3. Estimating Net Worth. Mia has $3,000 in assets, a finance company loan for $500, and an outstand- ing credit card balance of $135. Mia\'s monthly cash inflows are $2,000, and she has monthly expenses of $1,650. What is Mia\'s net worth? 4. Estimating Net Worth. At the beginning of the year, Arianne had a net worth of $5,000. During the year she set aside $100 per month from her paycheck for savings and borrowed $500 from her cousin that she must pay back in January of next year. What was her net worth at the end of the year? 5. Estimating Net Worth. Anna has just received a gift of $500 for her graduation, which increased her net worth by $500. If she uses the money to purchase a tablet computer, how will her net worth be affected? If.she invests the $500 at 4% interest peryear, what will it be worth in oneyear?

Solution

Net assets = Total Assets - Total Liabilities

Case -1

Total Assets:

Mia Assets

$3,000

A

Less: Total Liabilities:

Loan in finance company

($500)

B

Outstanding credit card balance

($135)

C

Net worth

$2,365

D=A-B-C

Mia\'s net worth

$2,635

Case -2

Opening Net worth

$5,000

A

Add: Total Assets increase during the year:

Savings ($100 per month*12)

$1,200

B

Less: Total Liabilities increase during the year:

Borrowing from cousin

($500)

C

Net worth

$5,700

D=A+B-c

Her net worth at the end of year

$5,700

Case -3

Current net worth of Anna (Received Gift) Its increases net worth since there is no obligation to repay money.

$500

If she uses the money for purchase of computer her net worth remains same since Computer is also is an Asset which increases net worth.

If she invests money at 4% interest per year then her net worth will be increased by 500*4% =$20
Total increase in her net worth after one year = $500+$20 = $520

	Net assets = Total Assets - Total Liabilities
Case -1	Total Assets:
	Mia Assets	$3,000	A
	Less: Total Liabilities:
	Loan in finance company	($500)	B
	Outstanding credit card balance	($135)	C
	Net worth	$2,365	D=A-B-C
	Mia\'s net worth	$2,635
Case -2	Opening Net worth	$5,000	A
	Add: Total Assets increase during the year:
	Savings ($100 per month*12)	$1,200	B
	Less: Total Liabilities increase during the year:
	Borrowing from cousin	($500)	C
	Net worth	$5,700	D=A+B-c
	Her net worth at the end of year	$5,700
Case -3	Current net worth of Anna (Received Gift) Its increases net worth since there is no obligation to repay money.	$500
	If she uses the money for purchase of computer her net worth remains same since Computer is also is an Asset which increases net worth.
	If she invests money at 4% interest per year then her net worth will be increased by 500*4% =$20 Total increase in her net worth after one year = $500+$20 = $520