Recommendation on Financial Modeling

$100.00

  • Risk associated with Financial Models
  • Role Of Financial Modeler

 

SKU: Fin989921

Learning outcomes (LO) mapping:

1. Explain the concept and principles of financial modelling and the skill set required to become a financial modeller.

2. Use Excel to effectively model business problems and extract essential data from spreadsheets.

3. Illustrate best practice modelling techniques by applying strategies for user-friendly design, consistency, error reduction and data security.

4. Effectively summarise and communicate the assumptions, implications and results of spreadsheet models.

5. Interpret and audit model results in the context of the business situation and address the inherent assumptions through stress testing.

 

Question 1

LO1: Explain the concept and principles of financial modelling and the skill set required to become a financial modeller.

You have been given responsibility for writing a briefing paper to your manager outlining how and why risk management frameworks and practices must encompass the risk in the use of Excel models in an organisation. Use examples to support your discussion.

The briefing paper should be structured and written to ensure that it can be delivered in a presentation to the organisation’s board of directors.

In your answer you should consider:

• regulation requiring the use of models
• best practice principles
• roles and processes in the organisation.

Marks for this question will be awarded for:

• providing insights into the organisation and its processes
• demonstrating knowledge of core concepts
• original thought (as opposed to copying or paraphrasing material directly from the topic notes or textbook)
• presentation and writing style.

 

Question 2

LO2: Use Excel to effectively model business problems and extract essential data from spreadsheets.

LO3: Illustrate best practice modelling techniques by applying strategies for user-friendly design, consistency, error reduction and data security.

Ray turns twenty-one on 1 September 2015. He plans to celebrate by buying a car. He has found one that he likes for $27,500. Ray will have a $6000 deposit by his birthday, leaving a loan principal of $21,500. He hopes to negotiate the loan based on an annual interest of 7.4%, with monthly payments over eight years, however, there is a chance that he may be able to afford to pay off the loan in five years. The bank charges $5.00 per month as a service fee.

Develop an Excel spreadsheet solution to show not only the amortisation schedule for Ray but also summary information such as key dates, total fees and total cost.

Note: You need to construct a spreadsheet for this question. All worksheet(s) should be clearly marked ‘Question 2’. The Excel file needs to be loaded separately to the Word document that contains your answer to Question 1 when submitting your assignment.

Marks for this question will be awarded based on:

Calculations

• Overall accuracy of the calculations

Spreadsheet structure (see Criteria-based Marking Guide for more details on spreadsheet criteria)

• formulas

• titles, labels, headings

• use of Excel tools

• professional presentation of spreadsheet, including appropriate formatting

• spreadsheet content.

 

Question 3

LO2: Use Excel to effectively model business problems and extract essential data from spreadsheets.

LO3: Illustrate best practice modelling techniques by applying strategies for user-friendly design, consistency, error reduction and data security.

Ausco is considering an investment in their retail business which will improve their annual cash flow stream by $19,600 in Year 1, $15,400 in Year 2, $14,000 in Year 3, $10,800 in Year 4, $7800 in Year 5, $4800 in Year 6 and $2300 in Year 7. The outlay for this investment is $51,342. The analysis to date also shows that a further $5000 will be required to be paid in year 3 of this project for maintenance expenditure. The appropriate cost of capital is 7.6%.

Develop an Excel spreadsheet solution to assist Ausco’s decision makers in deciding whether or not to accept this investment.

Note: You need to construct a spreadsheet for this question. The worksheet(s) should be clearly marked ‘Question 3’.

Marks for this question will be awarded based on:

Calculations

• Overall accuracy of the calculations

Spreadsheet structure (see Criteria-based Marking Guide for more details on spreadsheet criteria)

• formulas

• titles, labels, headings

• use of Excel tools

• professional presentation of spreadsheet, including appropriate formatting

• spreadsheet content.

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