FINC3304(BUSINESS FINANCE)

Final Project - Fall 2017

Instruction:

1.The purpose of the three mini-projects is to strength 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.

1. You need to work on the mini-projects inExcel. Your final mini-project report should be well-organized and typed in aWordfile. Are required to submitboth your Word report and Excel filesto the instructor using the mini-project submission tool in Blackboard. The style and organization of the project accounts for 10 points.

1. You are required to work on the workindependently. The due date for the project is11:59pm on Sunday, December 3^rd.

Mini-Project 1: Mortgage Loan Analysis(60 points):

You plan to buy a house in Houston in January 2018. The sale price is $350,000. You need to pay 20% down payments and borrow additional 80% from Wells Fargo with a 20-year, 3.6% fixed-rate mortgage loan. You are expected to pay an equal MONTHLY payment starting from March 2018 for a total of 20 years.

(1) Calculate your expected monthly mortgage payment.

(2) Develop the 2018~2038 amortization table for your mortgage.

(1)When you prepare my 2018 tax filing, what is the total mortgage interest payment that you can consider for the tax deduction?

Mini-Project 2: Capital Budgeting Analysis(60 points):

A firm is planning a new project that is projected to yield cash inflows of $395,000 in Year 1, $286,000 per year in Years 2 through 5, and $278,000 in Years 6 through 11.This investment will cost the company $1,980,000 today (initial outlay). We assume that the firm's cost of capital is 10%.

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

(2)Compute the project's 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.

Mini-Project 3: Weighted Average Cost of Capital (80 points):

Find 2017 financial statements for Amazon.Com from UHV Mergent Online database, Yahoo! Finance, Google Finance, or other finance sources.

(1)Estimate the weights of capital (debt, preferred stock, and common stock) for the company.

(2)Estimate the before-tax and after-tax component cost of debt for the firm.

(3)Estimate the component cost of preferred stock (if applicable) for the firm.

(4)Estimate the component cost of common equity using CAPM for the firm.

(5)Compute the firm's weighted average cost of capital (WACC). Discuss your findings.