A borrower is offered a 30 year, fully amortizing ARM with an initial rate of 3.2%. After the first year, the interest rate will adjust each year, using 1 yr LIBOR as the index, plus a margin of 175bp. The price of the property is $8,000,000 and the loan will have an initial LTV ratio of 75% At the first reset date, 1 year LIBOR is at 3%. What is the borrower’s payment during the 2nd year of the loan?
In: Finance
A project has annual cash flows of $7,500 for the next 10 years and then $11,000 each year for the following 10 years. The IRR of this 20-year project is 10.83%. If the firm's WACC is 9%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
year o investment is 0
Year 1 investment is the 7,500
year 11 turns to 11,000
thank you
In: Finance
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to find the PI for the company’s project, assuming the company’s cost of capital is 6.11 percent. The initial outlay for the project is $498,112. The project will produce the following end-of-the-year after-tax cash inflows of
Year 1: $148,444
Year 2: $92,435
Year 3: $171,330
Year 4: $436,132
In: Finance
Fuente, Inc., has identified an investment project with the following cash flows. Year 1 - $675 Year 2 - $900 Year 3 - $1,175 Year 4 - $1,300
a. If the discount rate is 9 percent, what is the future value of these cash flows in year 4?
b. What is the future value at a discount rate of 19 percent?
c. What is the future value at discount rate of 28 percent?
In: Finance
Your company purchased an airplane for $470,000 and will depreciate it using a 7-year MACRS with a 6-year life. Salvage value in year 6 is expected to be $160,000. The airplane is expected to increase company revenues by $179,000 per year. However, O&M costs are expected to be $20,000 per year. Your company is in the 21% tax bracket and the company's MARR is 15%. What is the Net Present Worth of this investment?
In: Economics
You need to borrow money today from your father. You can make payments like this: 1st year: $1000, 2nd year: $2,000, 3rd year: $3,000, 4th year: $4,000, 5th year: $5,000. Your dad says that hes getting 4% on his CDs, compounded annually, and you'll need to pay him the same rate. How much can you borrow?
In: Finance
Calculate the effective interest rate for the following nominal interest rates:
a. Interest rate of 11% per year, compounded annually
b. Interest rate of 11% per year, compounded semi-annually
c. Interest rate of 11% per year, compounded quarterly
d. Interest rate of 11% per year, compounded daily e. Interest rate of 11% per year, compounded continuously
In: Economics
Bobby Bragg has decided to buy a 10-year old car from Banger Motors for $6 000. Rockwelle Finance has offered Bobby a 4-year loan at an annual interest rate of 15% p.a. with annual payments at the end of each year.
Required:
(1) What is Bobby’s annual loan repayment amount?
(2) What is the principal component of the year 2 loan repayment?
(3) What is the interest component of the year 3 loan repayment?
(4) What is the opening balance of the loan at the commencement of year 4?
In: Finance
Whitestone Products is considering a new project whose data are shown below. The required equipment has a 3-year tax life, and the MACRS rates for such property are 33.33%, 44.45%, 14.81%, and 7.41% for Year 1 through Year 4. Revenues and other operating costs are expected to be constant over the project’s 10-year expected operating life. What is the project’s Year 4 cash flow?
Equipment cost (depreciable basis) | $50,000 |
Sales revenues, each year | $40,212 |
Operating costs (excluding depreciation) | $20,222 |
Tax rate | 32% |
In: Finance
Solo Corp. is evaluating a project with the following cash flows:
Year Cash Flow 0 –$13,200
Year 1 Cash Flow $6,100
Year 2 Cash Flow $6,700
Year 3 Cash Flow $6,200
Year 4 Cash Flow $5,100
Year 5 Cash Flow $–4,500
The company uses a disount rate of 11 percent and a reinvestment rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods using these interest rates.
a. MIRR using the discounting approach.
In: Finance