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MA514 Business Finance 4 Assessment Details and Submission Guidelines School School of Business Course Name Master of Professional Accounting Unit Code MA514 Unit Title Business Finance Assessment...

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MA514    Business Finance        4
    Assessment Details and Submission Guidelines
    School
    School of Business
    Course Name
    Master of Professional Accounting
    Unit Code
    MA514
    Unit Title
    Business Finance
    Assessment Autho
    Pu Chen
    Assessment Type
    Assignment (individual)
    Assessment Title
    Report (individual)
    Unit Learning Outcomes covered in this assessment
    · b. Demonstrate knowledge of time value of money (TVM) concepts and techniques, capital market theories, and methods of financing businesses, and critically apply the concepts to evaluate economic and investment decisions, including the valuation of bonds and shares and the assessment of capital budgeting decisions.
· c. Demonstrate strong conceptual corporate finance knowledge to analyse and interpret advances in theory for professional practice.
· e. Communicate relevant high level finance knowledge with other professionals.
    Weight
    20%
    Total Marks
    100
    Word limit
    2000
    Release Date
    Week 8. 7th May 2018
    Due Date
     Week 10
    Submission Guidelines
    · All work must be submitted on Moodle by the due date along with a completed Assignment Cover Page.
· The assignment must be in MS Word format, 1.5 spacing, 11-pt Cali
i (Body) font and 2 cm margins on all four sides of your page with appropriate section headings.
· Reference sources must be cited in the text of the report, and listed appropriately at the end in a reference list using APA or IEEE referencing style for School of Business and School of Information Technology and Engineering respectively.
    Extension
    · If an extension of time to submit work is required, a Special Consideration Application must be submitted directly to the School's Administration Officer, in Melbourne on Level 6 or in Sydney on Level 7. You must submit this application three working days prior to the due date of the assignment. Further information is available at:
http:
www.mit.edu.au/about-mit/institute-publications/policies-procedures-and-guidelines/specialconsiderationdeferment
    Academic Misconduct
    · Academic Misconduct is a serious offence. Depending on the seriousness of the case, penalties can vary from a written warning or zero marks to exclusion from the course or rescinding the degree. Students should make themselves familiar with the full policy and procedure available at: http:
www.mit.edu.au/about-mit/institute-publications/policies-procedures-and-guidelines/Plagiarism-Academic-Misconduct-Policy-Procedure. For further information, please refer to the Academic Integrity Section in your Unit Description.
Assessment Cover Sheet
    Student ID Numbe
s:
    Student Surname/s:
    Given name/s:
    
    
    
    
    
    
    
    
    
    
    
    
    Course:
    School:
    Unit code:
    Unit title:
    Due date:
    Date submitted:
    Campus:
    Lecturer:
    Tutor:
    Student Declaration
I/We declare that:
1. the work contained in this assignment is my/our own work/group work, except where acknowledgement of sources is made;
1. certify that this assessment has not been submitted previously for academic credit in this or any other course;
1. I/we have read the MIT’s Plagiarism and Academic Misconduct Policy Procedure, and I/we understand the consequences of engaging in plagiarism;
1. a copy of the original assignment is retained by me/us and that I/we may be required to submit the original assignment to the Lecturer and/or Unit Co-ordinator upon request;
I/we have not plagiarised the work of others or participated in unauthorised collaboration when preparing this assignment.
    MIT ID
    Signature
    Date
    
    
    
    
    
    
    
    
    
    
    
    
Assignment Description
Students are required to undertake research and conduct analytic work following given instructions in the areas of business finance covered in learning materials from week 1 to week 10 inclusive. Through this assignment, students should identify the main issues related to the realization of “Great Australian Dream”, and provide a workable financial plan to realize the “Great Australian Dream”. Students are strongly advised to reference professional websites, journal articles and text books in this assignment.
The Case
You are supposed to be a financial adviser, providing professional financial consultancy to your clients. One of your clients is a young technical migrant who has just completed her postgraduate degree and found a job in Sydney/Melbourne with an entry salary of $80000/year. She wishes to purchase a house to realise her “Australian Dream”, for which she has saved $ XXXXXXXXXXIdeally, the purchase should happen within 10 years. However, she knows that Sydney/Melbourne housing price is very high. She is not sure how she can afford to purchase a house in Sydney/Melbourne. Your task now is to work out a financial plan for her that can guide her to her target.
Required:
This assignment is to be completed individually and is to be submitted in Week 10.
100 marks
    #
    Key tasks to be completed
    
1
    Forecast the housing price in Sydney/Melbourne
    
2
    Forecast the income development
    3
    Predict the net income of your client
    4
    Determine the upfront payments and purchase costs, depending on the proportion of the upfront payment
    
5
    Work out the financial plan showing how to realize the “Australian Dream” for your client.
    6
    Risk assessment of the financial plan
    
7
    Report detailing the financial plan
    8
    Final Submission of Complete Assignment
    
    
You are required to do the following:
1. Investigate the historical housing price data for Sydney or Melbourne and make an appropriate forecast of the housing price for the next 20 years. Clearly state the assumptions you make in order to obtain the forecasts of housing price and justify your assumptions by providing convincing arguments. XXXXXXXXXXHistorical housing price data are available on the ABS website.                 10 Marks
2. Investigate the historical income data for Sydney or Melbourne and make an appropriate forecast of the income of your client for the next 10 years. Clearly state the assumptions you make in order to obtain the forecast and justify your assumptions by providing supportive arguments.             10 Marks
3. Calculate the nett income of your client, given that she is single and does not have dependent. You can use the ATO tax Calculator to determine the nett income. Make a realistic assumption on the monthly expense of your client and determine the capacity of monthly repayment of your client. Find out the most favourite cu
ent home loan rate, and determine the maximum amount your client can bo
ow at the best rate.
10 Marks
4. Usually, a bank will finance only up to 80% of the property value, i.e. the buyer needs to pay upfront 20% of the property value. Alternatively, if the upfront payment is less than 20% buyer needs to pay mortgage insurance. When purchasing a property you need also to consider the stamp duty that is associate with property purchase. You can determine the amount of stamp duty with online stamp duty calculator. What is the house price your client can afford now?                         10 Marks

5. If the cu
ent financial situation of your client cannot afford a house, please work out a financial plan that will guide your client to realize her “Australian Dream”, where you need to consider how your client can invest her savings to achieve the target of upfront payment plus stamp duty. You need to provide a plan with 20% upfront payment and an alternative plan of 5% upfront payment plus mortgage insurance. Here you need to consider that the property price is changing following your answer in task 1 and hence the saving target is changing with time, and the income of your client is also changing with time following your answer in task 2. Use an excel table to show how the target will be achieved and when the house purchase can take place.                                 30 Marks
6. Since cu
ent interest rate is at its historically low. In the coming years, the mortgage rate may increase to 7% and stay at the level for several years before it goes down again. Assuming that the mortgage rate will increase to 7% in the third year after purchasing the house, what is the impact of the increased interest rate on your financial plan? Show the impact on the excel table of your financial plan. Can your client withstand this increase in interest rate? How would you advise your client to manage this risk?
20 Marks
7. Based on your analysis above, write a report with financial plan to your client detailing what are the assumptions underlying this financial plan, when the “Austrian Dream” can come true, and what are the potential risks entailed by the assumptions and how the risk is managed in the financial plan.
10 Marks
    Last updated: Month, yea
    Lasted Updated: April, 2018
Answered Same Day Jun 21, 2020 MA514

Solution

Aarti J answered on Jun 23 2020
148 Votes
Sheet1
        Last year Change    3.80%
        Cu
ent year change    -1%
        Average    1.40%
        Add inflation:    5.03%
        Assumed growth rate    6.43%
        year    Price
        0    $ 681,000.00
        1    $ 724,788.30
        2    $ 771,392.19
        3    $ 820,992.71
        4    $ 873,782.54
        5    $ 929,966.75
        6    $ 989,763.62
        7    $ 1,053,405.42
        8    $ 1,121,139.38
        9    $ 1,193,228.65
        10    $ 1,269,953.25
        11    $ 1,351,611.24
        12    $ 1,438,519.85
        13    $ 1,531,016.67
        14    $ 1,629,461.04
        15    $ 1,734,235.39
        16    $ 1,845,746.72
        17    $ 1,964,428.24
        18    $ 2,090,740.97
        19    $ 2,225,175.62
        20    $ 2,368,254.41
        Income
        Growth rate    2.30%
        Inflation rate    5.03%
        Average growth rate income    7.33%
        year    Price    Savings    Savings    Investment in mutual funds    Return    Investment in savings    Return    Total return
        0    $ 80,000.00    0.25    $ 20,000.00    $ 10,000.00    $ 11,200.00    $ 10,000.00    $ 10,600.00    $ 21,800.00
        1    $ 85,864.00    0.25    $ 21,466.00    $ 10,733.00    $ 12,020.96    $ 10,733.00    $ 11,376.98    $ 23,397.94
        2    $ 92,157.83    0.25    $ 23,039.46    $ 11,519.73    $ 12,902.10    $ 11,519.73    $ 12,210.91    $ 25,113.01
        3    $ 98,913.00    0.25    $ 24,728.25    $ 12,364.13    $ 13,847.82    $ 12,364.13    $ 13,105.97    $ 26,953.79
        4    $ 106,163.32    0.25    $ 26,540.83    $ 13,270.42    $ 14,862.87    $ 13,270.42    $ 14,066.64    $ 28,929.51
        5    $ 113,945.09    0.25    $ 28,486.27    $ 14,243.14    $ 15,952.31    $ 14,243.14    $ 15,097.73    $ 31,050.04
        6    $ 122,297.27    0.25    $ 30,574.32    $ 15,287.16    $ 17,121.62    $ 15,287.16    $ 16,204.39    $ 33,326.01
        7    $ 131,261.66    0.25    $ 32,815.42    $ 16,407.71    $ 18,376.63    $ 16,407.71    $ 17,392.17    $ 35,768.80
        8    $ 140,883.14    0.25    $ 35,220.78    $ 17,610.39    $ 19,723.64    $ 17,610.39    $ 18,667.02    $ 38,390.66
        9    $ 151,209.87    0.25    $ 37,802.47    $ 18,901.23    $ 21,169.38    $ 18,901.23    $ 20,035.31    $ 41,204.69
        10    $ 162,293.56    0.25    $ 40,573.39    $ 20,286.69    $ 22,721.10    $ 20,286.69    $ 21,503.90    $ 44,224.99
        Total savings            $ 321,247.19        $ 179,898.43        $ 170,261.01    $ 350,159.43
        Expenses
        Income    80000
        Expenses:
        Rental expenses    15000
        Electricity expense    5000
        Food expense    7500
        Utilities expenses    2500
        Credit card bill    10000
        Shopping expenses    7500
        Medical expenses    5000
        Savings    7000
        Entertainment    2000
        Clothing expenses    7000
        Total expenses    68500
        Taxable income    11500
        Taxes    0
        Net income    11500
        Price of the Residence    1270000
        Mortgage expenses    138.8
        Transfer expenses    138.8
        Stamp Duty    53340
        Total price of house    1323617.6
        Down payment    264723.52
        Bank loan    1058894.08
        year    Price    Savings    Savings    Investment in mutual funds    Return    Investment in savings    Return    Total return
        0    $ 80,000.00    0.25    $ 20,000.00    $ 10,000.00    $ 11,200.00    $ 10,000.00    $ 10,600.00    $ 21,800.00
        1    $ 85,864.00    0.25    $ 21,466.00    $ 10,733.00    $ 12,020.96    $ 10,733.00    $ 11,376.98    $ 23,397.94
        2    $ 92,157.83    0.25    $ 23,039.46    $ 11,519.73    $ 12,902.10    $ 11,519.73    $ 12,210.91    $ 25,113.01
        3    $ 98,913.00    0.25    $ 24,728.25    $ 12,364.13    $ 13,847.82    $ 12,364.13    $ 13,105.97    $ 26,953.79
        4    $ 106,163.32    0.25    $ 26,540.83    $ 13,270.42    $ 14,862.87    $ 13,270.42    $ 14,066.64    $ 28,929.51
        5    $ 113,945.09    0.25    $ 28,486.27    $ 14,243.14    $ 15,952.31    $ 14,243.14    $ 15,097.73    $ 31,050.04
        6    $ 122,297.27    0.25    $ 30,574.32    $ 15,287.16    $ 17,121.62    $ 15,287.16    $ 16,204.39    $ 33,326.01
        7    $ 131,261.66    0.25    $ 32,815.42    $ 16,407.71    $ 18,376.63    $ 16,407.71    $ 17,392.17    $ 35,768.80
        8    $ 140,883.14    0.25    $ 35,220.78    $ 17,610.39    $ 19,723.64    $ 17,610.39    $ 18,667.02    $ 38,390.66
        9    $ 151,209.87    0.25    $ 37,802.47    $ 18,901.23    $ 21,169.38    $ 18,901.23    $ 20,035.31    $ 41,204.69
        10    $ 162,293.56    0.25    $ 40,573.39    $ 20,286.69    $ 22,721.10    $ 20,286.69    $ 21,503.90    $ 44,224.99
        Total savings            $ 321,247.19        $ 179,898.43        $ 170,261.01    $ 350,159.43
        Loan amount    1058894.08
        Nper    30
        Interest rate    4%
        PMT    ₹ -5,055.32
        Month    Interest    Principal    Payment    Balance
        0                $ 1,058,894.08
        1    $ 3,529.65    $ 1,525.67    $ 5,055.32    $ 1,057,368.41
        2    $ 3,524.56    $ 1,530.76    $ 5,055.32    $ 1,055,837.65
        3    $ 3,519.46    $ 1,535.86    $ 5,055.32    $ 1,054,301.79
        4    $ 3,514.34    $ 1,540.98    $ 5,055.32    $ 1,052,760.81
        5    $ 3,509.20    $ 1,546.12    $ 5,055.32    $ 1,051,214.69
        6    $ 3,504.05    $ 1,551.27    $ 5,055.32    $ 1,049,663.42
        7    $ 3,498.88    $ 1,556.44    $ 5,055.32    $ 1,048,106.98
        8    $ 3,493.69    $ 1,561.63    $ 5,055.32    $ 1,046,545.35
        9    $ 3,488.48    $ 1,566.84    $ 5,055.32    $ 1,044,978.51
        10    $ 3,483.26    $ 1,572.06    $ 5,055.32    $ 1,043,406.45
        11    $ 3,478.02    $ 1,577.30    $ 5,055.32    $ 1,041,829.15
        12    $ 3,472.76    $ 1,582.56    $ 5,055.32    $ 1,040,246.60
        13    $ 3,467.49    $ 1,587.83    $ 5,055.32    $ 1,038,658.77
        14    $ 3,462.20    $ 1,593.12    $ 5,055.32    $ 1,037,065.64
        15    $ 3,456.89    $ 1,598.43    $ 5,055.32    $ 1,035,467.21
        16    $ 3,451.56    $ 1,603.76    $ 5,055.32    $ 1,033,863.44
        17    $ 3,446.21    $ 1,609.11    $ 5,055.32    $ 1,032,254.34
        18    $ 3,440.85    $ 1,614.47    $ 5,055.32    $ 1,030,639.86
        19    $ 3,435.47    $ 1,619.85    $ 5,055.32    $ 1,029,020.01
        20    $ 3,430.07    $ 1,625.25    $ 5,055.32    $ 1,027,394.76
        21    $ 3,424.65    $ 1,630.67    $ 5,055.32    $ 1,025,764.09
        22    $ 3,419.21    $ 1,636.11    $ 5,055.32    $ 1,024,127.98
        23    $ 3,413.76    $ 1,641.56    $ 5,055.32    $ 1,022,486.42
        24    $ 3,408.29    $ 1,647.03    $ 5,055.32    $ 1,020,839.39
        25    $ 3,402.80    $ 1,652.52    $ 5,055.32    $ 1,019,186.87
        26    $ 3,397.29    $ 1,658.03    $ 5,055.32    $ 1,017,528.84
        27    $ 3,391.76    $ 1,663.56    $ 5,055.32    $ 1,015,865.28
        28    $ 3,386.22    $ 1,669.10    $ 5,055.32    $ 1,014,196.18
        29    $ 3,380.65    $ 1,674.67    $ 5,055.32    $ 1,012,521.51
        30    $ 3,375.07    $ 1,680.25    $ 5,055.32    $ 1,010,841.26
        31    $ 3,369.47    $ 1,685.85    $ 5,055.32    $ 1,009,155.41
        32    $ 3,363.85    $ 1,691.47    $ 5,055.32    $ 1,007,463.94
        33    $ 3,358.21    $ 1,697.11    $ 5,055.32    $ 1,005,766.84
        34    $ 3,352.56    $ 1,702.76    $ 5,055.32    $ 1,004,064.07
        35    $ 3,346.88    $ 1,708.44    $ 5,055.32    $ 1,002,355.63
        36    $ 3,341.19    $ 1,714.13    $ 5,055.32    $ 1,000,641.50
        Loan amount    $ 1,000,641.50
        Nper    27
        Interest rate    7%
        PMT    $ 6,882.56
        Month    Interest    Principal    Payment    Balance
        36                $ 1,000,641.50
        37    $ 5,837.08    $ 1,045.49    $ 6,882.56    $ 999,596.01
        38    $ 5,830.98    $ 1,051.58    $ 6,882.56    $ 998,544.43
        39    $ 5,824.84    $ 1,057.72    $ 6,882.56    $ 997,486.71
        40    $ 5,818.67    $ 1,063.89    $ 6,882.56    $ 996,422.82
        41    $ 5,812.47    $ 1,070.10    $ 6,882.56    $ 995,352.72
        42    $ 5,806.22    $ 1,076.34    $ 6,882.56    $ 994,276.39
        43    $ 5,799.95    $ 1,082.62    $ 6,882.56    $ 993,193.77
        44    $ 5,793.63    $ 1,088.93    $ 6,882.56    $ 992,104.84
        45    $ 5,787.28    $ 1,095.28    $ 6,882.56    $ 991,009.56
        46    $ 5,780.89    $ 1,101.67    $ 6,882.56    $ 989,907.88
        47    $ 5,774.46    $ 1,108.10    $ 6,882.56    $ 988,799.78
        48    $ 5,768.00    $ 1,114.56    $ 6,882.56    $ 987,685.22
        49    $ 5,761.50    $ 1,121.06    $ 6,882.56    $ 986,564.16
        50    $ 5,754.96    $ 1,127.60    $ 6,882.56    $ 985,436.55
        51    $ 5,748.38    $ 1,134.18    $ 6,882.56    $ 984,302.37
        52    $ 5,741.76    $ 1,140.80    $ 6,882.56    $ 983,161.57
        53    $ 5,735.11    $ 1,147.45    $ 6,882.56    $ 982,014.12
        54    $ 5,728.42    $ 1,154.15    $ 6,882.56    $ 980,859.97
        55    $ 5,721.68    $ 1,160.88    $ 6,882.56    $ 979,699.10
        56    $ 5,714.91    $ 1,167.65    $ 6,882.56    $ 978,531.45
        57    $ 5,708.10    $ 1,174.46    $ 6,882.56    $ 977,356.98
        58    $ 5,701.25    $ 1,181.31    $ 6,882.56    $ ...
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