MIM $513$ CORPORATE FINANCE CASE STUDY $$ BUY VS RENT DECISION Due Date and Time: $16$ June $2024$ at $11$:$59$PM $($end of day$).$ Submission Method: Upload your documents on Blackboard. Maximum Attempts to upload: $2($only the last one will be marked$).$ Instructions: Part $1$: One person from each group should submit an Excel file with the computations and answers to the questions set. The answers should result from formulas and functions; do not simply input a number. Part $2$: The same person from each group should submit a report as a Word or PDF file. This should not exceed $2-3$ pages, excluding any tables and$/$or references you may wish to use. The format of the report should be Arial font, $11$ font size, $1\mathrm{.}5$ spacing and normal margins around. Submission of only one of the two required files will be considered non$-$submission. Late Submission: $5\%$ reduction in the final mark for every $12$ hours of delay in submission. Non$-$Submission: Grade $69\%($F$)$ ASSUMPTIONS a$)$ The Wongs only need to pay back the residual amount of the mortgage$$s principal when they decide to sell their property; that is$,$ there are no closing fees or penalties from the bank for the early repayment of their mortgage. b$)$ The Wongs could earn every month a rate equivalent to the mortgage$$s monthly rate if they were to invest their funds in equivalent investments. c$)$ The mortgage the Wongs can get is a reducing balance one. d$)$ The Wongs have sufficient savings for all required initial expenditures for purchasing the property. e$)$ The mortgage rate stays fixed at $3\%$ annually for the duration of the mortgage. f$)$ Assume all figures are in USD; hence, don$$t convert currencies. $1$ PART $1$ COMPUTATIONS IN EXCEL $(50$ marks$)$ a$)$ Determine the required monthly payments for the mortgage. $[5$ marks$]$ b$)$ Determine the initial cash outflows for the buy decision. $[5$ marks$]$ c$)$ Determine the monthly opportunity cost related to using the required initial funds for purchasing the property. $[5$ marks$]$ d$)$ Determine the present value of all cash outflows of the buy decision for the $10$ years that Wongs plan to stay in the property and compare them to the present value of the rent over the same period if the rent amount remains constant. $[10$ marks$]$ e$)$ Determine the principal outstanding on the mortgage at the end of $10$ years. $[5$ marks$]$ f$)$ Determine the net gain $($or loss$)$ from selling the property after $10$ years under the following scenarios: i$.$ ii$.$ iii. iv$.$ The value of the property remains unchanged. The value of the property increases by $10\%.$ The value of the property decreases by $10\%.$ The value of the property and the rent increase by $0\mathrm{.}15\%$ per month. $[20$ marks$]$ PART $2$ REPORT & RECOMMENDATION $(50$ marks$)$ Based on the analysis performed, write a report with your advice to the Wongs. To this end, briefly describe what the analysis entailed $[10$ marks$],$ summarise your results $[5$ marks$]$ and provide your recommendation based on the quantitative insights gained $[20$ marks$].$ Finally, discuss any qualitative considerations that the Wongs may wish to factor in their decision $[10$ marks$].$ Remember to pay attention to the report$$s presentation $[5$ marks$].$