Instruction:

1. The purpose of the three mini-projects is to strengthen your financial and quantitative analysis abilities. There are 200 points for the three mini-projects. You are required to show your working process and discuss your findings in details.

You need to work on the mini-projects in Excel. Your final mini-project report should be well-organized and typed in a Word file. Are required to submit both your Word report and Excel files to the instructor using the mini-project submission tool in Blackboard. The style and organization of the project accounts for 10 points.

The due date for the project is 11:59pm on Sunday, December 8th.

Mini-Project 1: Mortgage Loan Analysis (50 points):

You plan to buy a house in December 2019. The sale price is $385,000. You need to pay 20% down payments and borrow additional 80% from Bank of America with a 25-year, 3.0% fixed-rate mortgage loan. You are expected to pay an equal MONTHLY payment starting from January 2020 for a total of 25 years.

(1) Calculate your expected monthly mortgage payment.

(2) Develop the 2020~2044 amortization table for your mortgage loan.

(1) When you prepare your 2020 tax filing, what is the total mortgage interest payment that you can consider for the tax deduction?

Mini-Project 2: Capital Budgeting Analysis (50 points):

A firm is planning a new project that is projected to yield cash flows of -$515,000 in Year 1, $586,000 per year in Years 2 through 3, and $678,000 in Years 4 through 6, and $728,000 in Years 7 through 10. This investment will cost the company $2,780,000 today (initial outlay). We assume that the firm’s cost of capital is 9.65%.

(1) Draw a time line to show the cash flows of the project.

(2) Compute 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.