What is the net present value of refinancing

Assignment Help Financial Management
Reference no: EM131920791

Suppose that five years ago you borrowed $500,000 using a 30-year fixed-rate mortgage with an annual interest rate of 7.00% with monthly payments and compounding. The interest rate on 30-year fixed- rate mortgages has fallen to 6.25% and you are wondering whether you should refinance the loan. Refinancing costs are expected to be 4% of the new loan amount.

What is the net present value of refinancing if you make all of the scheduled payments on the new loan?

What is the net present value of refinancing if you pay off the new loan at the end of the 6th year?

How many payments do you need to make on the new loan in order for refinancing to have a positive net present value?

Reference no: EM131920791

Questions Cloud

List their coupon-maturity-ratings-last price and yield : List their coupon, maturity, ratings (Moody and S&P), Last price and Yield. Calculate their yields using price and check whether you get same yields as listed.
Evaluating capital investment project for the firm : what rate should a manager use in evaluating a capital investment project for the firm and why?
Concern facing company key stakeholders : Describe what you believe to be the most pressing investor relations issue/concern facing your company’s key stakeholders in 2017.
Runs on compressed natural gas stored in two cylinders : An aerodynamic three wheeled automobile (the dart) runs on a compressed natural gas stored in two cylinders in the rear of the vehicle.
What is the net present value of refinancing : What is the net present value of refinancing if you make all of the scheduled payments on the new loan?
Natural gas stored in two cylinders in the rear of vehicle : An aerodynamic three wheeled automobile (the dart) runs on a compressed natural gas stored in two cylinders in the rear of the vehicle.
What was market risk premium : The average annual return on an Index from 1986 to 1995 was 21.40 percent. What was the market risk premium during these ten years?
Plan to get in on the solar panel leasing business : Suppose your friend, Pat, approaches you with a plan to get in on the solar panel leasing business.
Calculate the equilibrium price for the three-month : Using Black-Scholes OPM, calculate the equilibrium price for the three-month ABC 60 European call option.

Reviews

Write a Review

Financial Management Questions & Answers

  Reduced by increasing the debt capital

What are the arguments for and against the view that the overall cost of capital can be reduced by increasing the debt capital?

  Management has concluded that capital structure is optimal

Jarvey Inc. has a debt ratio of 25 percent. Management has concluded that this capital structure is optimal.

  Calculating investment returns

Calculating Investment Returns: You bought one of Bergen Manufacturing Co.’s 7 percent coupon bonds one year ago for $943.82. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today when the require..

  Relationship is pursuing wholesale defensive strategy

A domestic bank that becomes a multinational bank to prevent erosion by foreign banks of the traveler's checks, touring, and foreign business market: Is palying the role of a desperated housewife in this relationship Is pursuing a wholesale defensive..

  What is the effect of the exercise of stock options

In computing earnings per share, preferred dividends are subtracted from. What is the effect of the exercise of stock options? What is important to a firm's long-term debt paying ability? Which is more desirable for a firm, in regards to interest ove..

  What is meant by rolling a hedge forward

What is meant by rolling a hedge forward? What is the initial margin requirement in October 2010?

  What is the value of annual deposit

It is desired to accumulate a fund of $1000 at the end of 8 years by equal deposits at the beginning of each year. If the deposits earn interest at 8% effective but the interest can be reinvested at only 5% effective. What is the value of annual depo..

  Compute both design-effective capacity utilization measures

Joes Tasty Burger has determined that its production facility has a design capacity of 400 hamburgers per day. The effective capacity, however, is 250 hamburgers per day. Lately Joe has noticed that output has been 300 hamburgers per day. Compute bot..

  The firm should initiate the proposed cash discount

Create a spreadsheet to analyze whether the firm should initiate the proposed cash discount.

  Transaction as either operating activity-investment activity

Classify each transaction as either (a) Operating Activity (b) An investment activity (c) A financing activity or (d) noncash investing and financing activity.

  What shows international transactions

What shows international transactions that involve currently produced goods and services?

  What is the net present value of the more attractive choice

What is the net present value of the more attractive choice?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd