Please present your answers to the 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, and Part c). Your spreadsheet should be clearly labelledand easy to understand. Make sure you identify what the inputs and outputs are.Please include the necessary information, e.g., title, axis titles, etc., in your plot.Please document and describe your working steps.
Spreadsheet Project Task 3 Today is 1 August 2018. Jimmy is 30 years old today and he is considering pur- chasing 5,000 units of XYZ shares today (XYZ’s current share price is $20). Jimmy will use his own savings to cover 20% of the purchase cost (i.e., $20,000) and he is planning to borrow the remaining 80% of the purchase cost (i.e., $80,000) using a 5-year personal loan (it starts from 1 August 2018) from MQU Bank. Jimmy now has two loan package to choose between. • Package 1. – Jimmy will make 60 monthly repayments at the beginning of each month over the following five years (from 1 August 2018 to 31 July 2023) with the first payment being made today. This loan needs to be fully repaid by the end of 5 years (i.e., when Jimmy is 35 years old.). – This package has an annual fee of $200. The package fee is paid on 1 August of each year during the following five years period (from 1 August 2018 to 31 July 2023). The first one being paid today. – The interest rate of this package is j12 = 10% p.a. • Package 2. – Jimmy will make 60 monthly repayments at the beginning of each month over the following five years with the first payment being made today. This loan needs to be fully repaid by the end of 5 years (i.e., when Jimmy is 35 years old.). – Jimmy can have a one year interest-only-period at the beginning of the mortgage. Jimmy’s repayments will be interest-only1 for the first year (i.e., first 12 payments will be interest-only payments), followed by pay- ments of principal plus interest for the following 4 years. 1Interest-only repayment means your repayments only cover the interest on the amount you have borrowed, during the interest-only period. For example, if you borrow $1,000 through a five- year mortgage on 1 July 2018 with a one year interest-only period at j12 = 6% during the first year (1 July 2018–30 June 2019), your monthly repayment is $1, 000×6%/12 = $5 per month. On 1 July 2019, you need to use the remaining four years to repay the borrowed $1,000. The present value on 1 July 2019 of all payments in the remaining four years should be equal to $1,000. 1 ACST201 Financial Modelling Spreadsheet Project Task 3 S2 2018 – This package has an annual fee of $400. The package fee is paid on 1 August of each year during the following five year period (from 1 August 2018 to 31 July 2023). The first one being paid today. – The interest rate of this package is j12 = 12% p.a. Jimmy also plans to sell all the XYZ shares in 5 years’ time (on 1 August 2023). He predicts that the XYZ share price will grow at a rate of y% p.a. Jimmy assumes that y = the Australian 10-year Government Bond Yield for 2017 + 10%. You need to use FactSet to find the Australian 10-year Government Bond Yield for 20172. Jimmy assumes that XYZ shares will pay a dividend on 1 January and 1 July of each year. Jimmy predicts that there are two potential outcomes for the dividend amount. • Outcome 1: the dividend amount is assumed to be $1 on 1 January 2019 and will increase at a rate of 5% per half-year. • Outcome 2: the dividend amount is assumed to be $3 on 1 January 2019 and will increase at a rate of 2% per half-year. a. [12 marks ] – Calculate the loan repayment amount (excluding the annual fee) for each month of package 1 and package 2. – Use Goal Seek to find the net borrowing cost for package 1 and pack- age 2 by including the annual fee (expressed as a rate p.a. compounded monthly). – Use a bar or column chart to compare the loan repayment amount of package 1 and package 2 over the five-year loan period. b. [8 marks ] – Calculate the share price on 1 August 2023. 2For example, if the XYZ share price is 30 on 1 August 2018 and y is assumed be 15%, the XYZ share price will be 30 from 1 August 2018 to 31 July 2019 and will be 30× (1 + 15%) from 1 August 2019 to 31 July 2020. 2 ACST201 Financial Modelling Spreadsheet Project Task 3 S2 2018 – Calculate the accumulated dividend value for outcomes 1 and 2. Assume a reinvestment rate of 0.5% per month. – Calculate the holding period rate for outcome 1 and 2. Please refer to the week 6 lecture for the holding period rate calculation. You can consider that the initial investment cost is $100,000 and the interest payment of this investment is the dividend payments. Express your answer as an annual rate of compound interest. c. [10 marks ] The cash outflow of this investment has been analysed in part a and the cash outflow of this investment has been analysed in part b. It is noticed that there are four potential outcomes for Jimmy: loan package 1 with dividend outcome 1, loan package 1 with dividend outcome 2, loan package 2 with dividend outcome 1 and loan package 2 with dividend outcome 2. – Find the net cash flow in each month from August 2018 to July August 2023 (inclusive3) for these four potential outcomes. – Calculate the present value of the net cash flow for these four potential outcomes. Assume that we use 5% p.a. to find the present value. – Use a bar or column chart to compare the present value of net cash flows for the four potential outcomes. The deadline for Spreadsheet Project Task 3 submission is October 8th 2018, 9:00AM. Present your answers to the above questions in a functional Excel spread- sheet (it should be a XLSX or XLS file), giving each solution on a separate sheet (labelled Part a, Part b, and Part c). Your spreadsheet should be clearly labelled and easy to understand. Make sure you identify what the inputs and outputs are. Please include the necessary information, e.g., title, axis titles, etc., in your plot. Please document and describe your working steps. Please 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. End 3You should include the sale of shares on 1 August 2023. You can treat August 2023 as the end of this period. 3 ACST201 Financial Modelling Spreadsheet Project Task 3 S2 2018