Mini-Project 1: Mortgage Loan Analysis: Mr. Davidson plans to buy a house at Sugar Land in May 2017. The sale price is $580,000. He is going to pay 20% down payments and borrow additional 80% from Bank of America with a 15-year, 3.8% fixed-rate mortgage loan. He is expected to pay an equal MONTHLY payment starting from June 2017 for a total of 15 years.
(1) Calculate the required monthly mortgage payment for Mr. Davidson.
(2) Construct the 2017~2025 amortization table for Mr. Davidson.
(1) When Mr. Davidson prepares his 2017 tax filing, what is the total mortgage interest payment that he can consider for deduction?Mini-Project 2: Capital Budgeting Analysis: The SL High Tech is planning a new investment project which is expected to yield cash inflows of $395,000 per year in Years 1 through 3, $286,000 per year in Years 4 through 6, and $278,000 in Years 7 through 10. This investment will cost the company $1,850,000 today (initial outlay). We assume that the firm's cost of capital is 7.5%.
(1) Draw a time line to show the cash flows of the project.
(2) Compute the project’s payback period, net present value (NPV), profitability index (PI), internal rate of return (IRR), and modified internal rate of return (MIRR).
(3) Discuss whether the project should be taken.