1. (Refinance Decision)

Amount Terms Cost of Refinancing

Original Loan $350,000 6%, 30

New Loan ______ 3.6%, __ $7,000

The original loan has been outstanding for 6 years. The owner plans to retain ownership of the property for another 7 years. The opportunity cost is 9%. Show MPVIFA numbers.

Should the loan be refinanced? Remember to answer this question using Present Value (PV) Analysis. Show the tables with labels when answering this question.

A. Table showing the calculations for change in Monthly Payments and Loan Balances

Complete the following table (required):

Loan years MPVIFA MP MPVIFA LB1 MPVIFA LB2

Original

New

B. Do the Present Value Analysis:

C. Decision using Marginal Analysis: