IUSB needs $10,000 to build a new MPA program building. The university is planning to use a mortgage arrangement with a bank, agreeing to repay the full amount plus interest at a 6 percent rate in 10 annual installments. The university wants to know the annual mortgage payment (Note: It is more common for a mortgage to require equal payments at the end of each period throughout the term of the loan).

(1) Computing Process & (Excel template).

(2) Therefore, how much will it pay the bank each year?

2.Decision on Long-Term Physical Capital

Case of Nonannuity: Computing Present Value of Investment

The Chief Financial Officer (CFO) of the YMCA South Bend. The YMCA is planning to build a new swimming pool this year.

The YMCA Board of Trustees (BOT) asked the CFO to evaluate the present value of this project. The construction of the swimming pool will cost $110 in 2024 (current year). And the new swimming pool will generate revenues in the following five years: 2025: $40 / 2026: $32 / 2027: $24 / 2028: $ 15 / 2029: $8. Finally, the average annual interest rate for the next five years would be 4 percent.

(1) computing process & Excel template).

(2) Should the CEO recommend BOT to construct the new swimming pool? Why or why not?

Year	t	FV of Revenue	Discounting Factor	PV of Revenue
2024
2025
2026
2027
2028
2029
Total

3. Computing a Selling Price of a Bond

The State of Indiana decided to issue a bond with a face value of $5 million and a stated annual interest rate (called coupon rate) of 5 percent three months ago. The State will pay interest payments semiannually for the next 20 years. The State will pay interestat the end of each period.It took three months for the State to issue and start to sell the bond because the State needed to find underwriters and complete very complicated paperwork associated with legal and financial issues related to the bond issue. Today, the State finally starts to sell bonds in the financial market and the market annual interest rate is 2 percent.

(1) the computing process & Excel template).

(2) What is the appropriate selling price of the bond? In other words, how much could the State receive from the financial market today by issuing the bond?

(3) Can the state charge a premium for the bond? Why? Then, how much premium can be charged?Or should the State offer to sell the bond at a discount? Why? Then, how much should be discounted?

4. Computing a Buying Price of a Bond

Today, through Goldman Sachs, an investment bank, Foundation wants to use an endowment fund to purchase a $500,000 (face value) City of South Band municipal bond with an annual 6 percent of stated interest rate and a remaining life of 10 years. The State will pay interest payments semiannually. The State will pay interest at the end of each period. Today, the market's annual interest rate is 4.5 percent.

(1) computing process & template

(2) What is the appropriate buying price of the bond? In other words, how much should you pay to buy the bond?

(3) Can the Foundation buy the bond at a discount? Why? Then, how much should be discounted? Or should the Foundation pay a premium to buy the bond? Why? Then, how much premium should be paid?

Year	t	FV of Revenue	Discounting Factor	PV of Revenue
2024
2025
2026
2027
2028
2029
Total