Problem
A. You are interested to buy a new car that costs $50,000. What would be the monthly payment if you like to repay the loan in 18 years and the interest rate is 7.5%?
B. A housing agent is insisting you to buy a house by taking a mortgage at the rate of 8% per year. The agent informed you that you have to pay $4,000 per month to have the mortgage for 20 years. What was the price of the house (or present value of the mortgage)?
C. How much should you be willing to pay for a bond with a face value $1,000 that pays 6% coupon and matures in 17 years if your expected rate of return is 7%?
D. FastTrack bikes is thinking of developing a new composite road bike. Development will take six years and the cost is $190,300 per year. Once in production, the bike is expected to make $286,185 per year for 15 years. The cash inflows begins at the end of year 7. Assuming the cost of capital is 5.7%, calculate the NPV of this investment opportunity.
E. OpenSeas, Inc., is evaluating the purchase of a new cruise ship. The ship will cost $497 million, and will operate for 23 years. OpenSeas expects annual cash flows from operating the ship to be $80.1 million and its cost of capital is 12%. What is the NPV of this project?