IFB215TC
2025/2026 Fundamentals of Finance
BSc Intelligent Supply Chain with Contemporary Entrepreneurialism – Year 3
SUBMISSION DEADLINE: 17:00 on 31th Oct 2025
INSTRUCTIONS TO CANDIDATES
1. Write a proprosal, not exceeding 2,000 words. Three points or pro rata per part thereof will be deducted for every 100 words by which the work exceeds the maximum length.
2. Please submit your coursework in Times New Roman, 12-point font.
3. This proposal requires electronic submission only. The electronic copy of the report should be submitted on Learning Mall Online by 17:00 on 31 Oct 2025, except for the approved extension.
4. University policy on late submission will be followed unless there is an agreed extension with the module leader.
• 5% of the assignment marks shall be deducted from the assessment mark for each working day after the submission date, up to a maximum of five working days. Work assessed below the pass mark will not be penalised for late submission of up to five days.
• Work received more than five working days after the submission deadline willreceive a mark of zero.
TO BUY OR NOT TO BUY?
In early 2021, Zenith Advisory, a mid-sized consultancy headquartered in São Paulo, faced an urgent decision. The lease on its prime office space had expired the day before, leaving the firm just 30 days to either renew at a higher rent or secure a new location. For the past five years, Zenith had enjoyed the building’s strategic location, which offered easy access to major clients and public transport. The property’s owner, struggling with liquidity pressures amid a cooling commercial real estate market, opted to sell rather than renew the lease and requested that Zenith vacate.
While scouting options, management identified an almost identical property nearby available for rent at R$90,000 per month—essentially the same amount they had been paying. Around the same time, their real estate broker presented an opportunity to purchase a comparable office in a fast-growing business district. The asking price was R$37.5 million, and the building came fully furnished with high-quality finishes, allowing immediate move-in. This set up a classic buy-versus-lease choice, requiring a detailed financial and strategic evaluation.
Brazil’s prime commercial real estate had experienced substantial appreciation in the 2010s, driven by corporate expansion, infrastructure improvements, and urban development. Data from the Central Bank of Brazil’s real estate indicators showed that high-end commercial assets in São Paulo appreciated significantly between 2015 and 2020. Analysts expected premium locations with modern amenities to continue attracting strong demand and holding long-term value.
If Zenith decides to buy, the purchase price is R$37.5 million with an initial 20% down payment (R$7.5 million) funded by liquidating financial investments yielding 7% per year (pre-tax), representing the opportunity cost of capital; the remaining 80% (R$30 million) would be financed through a 20-year fixed-rate commercial mortgage at 10.25% per annum with monthly compounding, with transaction costs comprising a 6% property transfer tax, 1% registration fee, and 1% brokerage fee, plus annual ownership costs of R$30,000 in property tax and R$3,000 per month for building maintenance; if Zenith opts to lease, the terms are monthly rent of R$90,000, maintenance of R$3,000 per month, and a one-time lease setup brokerage fee of R$75,000.
Under Brazilian corporate tax rules, mortgage interest and certain ownership expenses are deductible from taxable income. With Zenith’s 30% corporate tax rate, these deductions could deliver significant cost savings over the financing term.
The CFO intended to compare the all-in monthly cost of ownership—including financing payments, taxes, maintenance, and opportunity cost—against leasing expenses, adjusted for tax effects. They would also project the building’s value over 20 years, assuming an annual appreciation rate of 7%, to assess the potential capital gain from ownership.
Ultimately, the decision would integrate both financial modeling and strategic factors such as liquidity needs, operational flexibility, and exposure to market risk.
Questions
Task: Submit a proposal together with Excel file to support the CFO’s buy-or-lease decision.
Your proposal must:
1. Present the detailed formulas you use and justify why each is appropriate (45%).
2. Compile all available information in Excel and use Excel to perform the calculations (45%).
3. Provide a clear final recommendation based on the results (10%).
Implications of Grading
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90–100%
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Extremely thorough and authoritative execution of the brief
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Evidence of significant independent research
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Reflective, perceptive, well structured, showing significant originality in ideas or argument
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Aptly focused and very well written, few areas for improvement
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Potentially worthy of publication
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80–89%
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Thorough execution of the brief
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Well structured, clearly argued, signs of originality and/or independent critical analytical ability
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Supported by independent research
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Materials well utilized, well focused and well written
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Displays mastery of the subject matter
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70–79%
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Good execution of the brief
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Well focused, knowledgeable
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Strong evidence of reading beyond the basic texts
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Displays a very good knowledge of the subject matter
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60–69%
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Well structured and well focused with strong evidence of reading beyond the basic texts
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Thorough and comprehensive in approach
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Displays a good knowledge of the subject matter and where appropriate displays sound grasps of relevant theories and concepts
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Approach generally analytical
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50–59%
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Competently structured, reasonably well focused and comprehensive, but tending tobe descriptive in approach
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Limited evidence of reading beyond the basic texts
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40–49%
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Tending to rely entirely on lecture materials
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Almost entirely descriptive in approach, limited knowledge and understanding of the subject matter displayed
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Partial and/or containing significant errors and/or irrelevancies, poorly structured
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30–39%
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Inadequate execution of the brief
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Highly partial and/or containing serious errors
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Contents partly or substantially irrelevant, poorly structured
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Displays little knowledge of the subject matter
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0–29%
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Seriously inadequate execution of the brief
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Failure to focus upon the question, seriously short or even devoid of theoretical under-pinning, large sections irrelevant
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