Emma and Chris are considering two options sell their home and buy a larger house for AUD3.0 million, or, keep their home and build a major extension for AUD1.0 million. Both options will involve increasing their existing home loan to fund the incremental expenditure. Assess and compare the financial viability of these two options (assume the existing bank loan is interest only with an interest rate of 6.0% per annum).

Emma and Chris 48 and 46 Married, home owners Three teenage children Lawyer and Biochemist AUD250,000 pa (Emma) and AUD145,000 pa (Chris) from salary AUD125,000 pa including the home loan Cash at bank AUD25,000 Superannuation AUD250,000 Home AUD1.5 million Car AUD 25,000 Home loan AUD1.0 million Repay home loan within five years Emma and Chris: Emma and Chris have been together for nearly 20 years and have three teenage children. Emma is a partner at a major law firm and Chris is a senior biochemist at a pharmaceuticals company. They both work long hours and hire home help for cleaning and cooking. Family is their top priority and they work hard to ensure that their family and work life is balanced and comfortable. The children are settled and happy at a local state high school. Emma and Chris are concerned that the family home is too small - the teenagers need more space. They are investigating two options - sell the home and buy a larger property, or, keep the home and build a major extension. As a hobby, Chris is involved with a group of scientists investigating the development of alternative protein foods that can be manufactured from weed plants. One of these products shows great potential and the group is considering lodging a patent application. The patent process is expensive and Chris's share of the costs will be AUD35,000. But the group has not decided to proceed or not. Both Emma and Chris consider themselves to be risk takers - they assess each opportunity on its merits. But they would never place in jeopardy their family or their family wealth