ACST2001 Financial Modelling
S1 2024
Spreadsheet project task
Today is 1 January 2024. Ella used $200,000 to purchase a florist business in Sydney. To operate this business, Ella needs to pay rent, maintenance costs, and labor costs. Here are the details:
❼ Rent will be paid by the end of each month with an amount of $2,000.
❼ Labor cost will be paid by the end of each month with an amount of $10,000.
❼ Maintenance cost will be paid by the end of each quarter with an amount of $500.
❼ Ella predicts that this florist franchise initially can have monthly revenue of $13,000. Assume that Ella can obtain this amount by the end of each month. Ella forecasts that this revenue amount will increase at the rate of y% p.a. The revenue increase will only happen at the beginning of each year. For example, this florist franchise initially has monthly revenue of $13,000 in 2024. Then the revenue amount will become $13,000(1+y%) per month in 2025 and $13, 000(1 + y%)2 per month in 2026.
❼ Ella plans to run this business for three years and predicts that she can sell this business on 1 January 2027 with an amount of $210,000.
a. Calculate the monthly net cash flows. Assume that Ella can reinvest all profit at a rate of 4.5% p.a. Use Goal Seek to find revenue increasing rate y% p.a. if Ella requires a holding period yield rate of 7.5% p.a. for this investment (from 1 January 2024 to 1 January 2027). Label this sheet as “Part a” .
b. Given that Ella needs to pay tax for her profit at a rate of 20% and tax is paid by the end of each quarter, calculate the monthly net cash flows (Assume that Ella does not need to pay tax for the proceeds from selling the business.). Assume that Ella can reinvest all after-tax profit at a rate of 4.8% p.a. Use Goal Seek to find revenue increasing rate y% p.a. if Ella requires a holding period yield rate of 7.5% p.a. for this investment (from 1 January 2024 to 1 January 2027). Label this sheet as “Part b” .
c. Ella plans to use an online promotion service to boost her business from 1 January 2024 to 31 March 2024. The cost of this service is listed in the following table.
Service price list
Weekday (Monday to Friday except public holidays) $150
Saturday (except public holiday) $180
Sunday and Public holidays $200
Calculate the present value of this promotion cost on 1 January 2024 by using an effective daily interest rate of 0.02%.
Hint :
❼ You can use this link (https://www.industrialrelations.nsw.gov.au/public- holidays/public-holidays-in-nsw/) to find the NSW public holidays for the promotion period.
❼ You can use the Weekday formula in Excel to returns the day of the week corresponding to a date. The day is given as an integer, ranging from 1 (Sunday) to 7 (Saturday), by default.
d. Ella is considering to takeout a loan of $10,000 to fund this promotion service. The bank has offered three loan options.
❼ Option 1: Ella needs to make daily payment of $67.2 from 1 January
2024 to 31 May 2024 (inclusive).
❼ Option 2: Ella needs to make monthly payment of $2,035 by the end of each month from January 2024 to May 2024 (inclusive)
❼ Option 3: Ella needs to make five payments by the end of each month from January 2024 to May 2024 (inclusive). Ella needs to pay $2,020 for January 2024, $2,030 for February 2024, $2,038 for March 2024, $2,040 for April 2024 and $2,045 for May 2024.
Use Goal Seek to find the implied effective annual rate (i.e., j1 ) charged by bank for these three loan options (Assume that there are 365 days in a year.). Which one is better? Use a bar or column chart to compare the loan repayment amount of option 2 and option 3. Plot all payments for option 2 and option 3. Label this sheet as Part d.
The deadline for Spreadsheet Project Task (group part) submission is April 30th 2024, 11:55PM. Present your answers to the above questions in a functional Excel spreadsheet (it should be a XLSX or XLS file), giving each solution on a separate sheet (labelled Part a, Part b, Part c and Part d). Your spreadsheet should be clearly labelled and easy to understand. Make sure you identify what the inputs and outputs are for each worksheet. You need to include the necessary information, e.g., title, axis titles, etc., in your plot. You need to document and describe your working steps. Note that uploading a file can take up to 10 or 15 minutes. You need to submit your file at least 20 minutes before the deadline to ensure a successful submission.