Margaret has just received an MS degree from Oxford University. She has outstanding school loans that require a monthly payment of £800. She wants to rent a small apartment in London near her new workplace and estimates that this purchase will add £1,000 per month to her existing monthly expenses. Margaret will have £1,950 available after meeting all her monthly living expenses. This amount can vary by plus or minus 20%.

a. To assess the potential impact of the additional borrowing on her financial leverage, calculate the DFL in tabular form for both the current and proposed rent payments, using Margaret’s available £1,950 as a base and a 20% change.

b. Can Margaret afford the additional rent payment?

c. Should Margaret take on the additional rent payment?