Introductory Modeling Case Study Analysis

Best Practice Principle:

The best practice principle that I have incorporated in the model is correctly identified because the decision to purchase the property is wholly and solely based on the financing problems of the family. If the rent is going to provide the benefit to the family, then why should the family opt to purchase the property after knowing that the property requires more cash than what they are currently paying for the rental house.

After knowing the truth that if the value of the property doubles every 10 years, and the owner goes to sell it 20 years after the acquisition date; it will not give any financial benefit, because the owner cannot afford to service the loan as he finds thatduring the term of the loan, he could not make sufficient debt payments for three or more consecutive months, and after selling the property, he will lose the original value that hewould invest for purchasing the property, which simply delivers the thought that the return on investing in property would be in negative in future, which will result in the loss of the amount that has been initially invested by the owner.

The best practices that I have used for structuring the model are

  1. The building up of a standalone more than three (3) statement model on one work sheet which includes the living expenditures, monthly rent, monthly income and monthly PAYG
  2. The assumptions have been separated clearly from the rest of the model
  3. Clear headings and subheadings have been used to clearly distinguishing the sections and other materials form each other’s
  4. pull forward information technique have been used to follow the logic of the model
  5. used tables to summarize the information

I have also avoided the circular references unless they are necessary for the modeling…………………………….


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