MAF101 - Fundamentals of Finance - Finance Assignment Help

Assignment Task

Question 1
You just signed a rental agreement for a property next to your work. The contract allows you to stay for 5 years, the rent is $400 per week paid beginning of each week and is expected to increase 2% per year. Shortly after the agreement is signed, the agent told you that due to the Covid-19 situation, the owner has returned from overseas and would like to live in his house. The owner would like to break the rental contract and offers you a compensation. You look around the area and find out that the rent on a similar property is $420 per week and if you would like to rent for 5 years, the rent has to be increased by 4% per annum.
What is the minimum compensation you are willing to accept from the owner so that you are not worse off? Discount rate is 8% per annum.
Hint: Cash flows are assumed to happen at the beginning of each year. Also, please assume 52 weeks in a year. Please show your working steps, formulas, and calculation in detail. 

Question 2
Alice just turned 30 years old and is currently working at the bank. Alice is currently making $90,000 per year and her salary will increase by 2 percent per annum. She is considering whether or not to do a Master in Finance at Deakin University.
She is currently considering the following options:

Option 1: She can enter the Master of Finance full time and gives up her income for 2 years.
The tuition fees for the Master program is $30,000 per year. After the program, she expects that she is able to land a job as a senior manager earning $120,000 that grows at 2% per annum

Option 2: She can do the Master of Finance program part time and work part time. In this case, the duration of the course will be 4 years and the tuition fees is $15,000 per year. She can only work part time; therefore, her salary is reduced by half. If Alice chooses to work part time, her salary will increase by 2 percent per year after the reduction. After the program, she expects that she is able to land a job as a senior manager earning $120,000 that grows at 2% per annum

Option 3: She can choose not to study at the Master of Finance program and simply continue her job.

Assumptions:
1. Alice expects to work until she is 65 regardless of whether she chooses to continue further studies or not.
2. Cash flows occur at the end of the year.
3. The cost of capital is assumed to be 8 percent per annum.
a. Prepare three Excel spreadsheets or table of cash flows and calculate the total present value of each of the options (ignore other cost/income she might have during the years)
b. Based on the outcome of your analysis, what advice would you give Alice? (i.e. which option is best for her.) Is there any other factors she should also consider?

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