Suppose that five years ago you took a fixed-rate mortgage on your home for $150,000 at 7.75% for 30 years, monthly payments. Today the mortgage rate on 25-year fixed-rate mortgages is 7.20% and you are considering refinancing. The existing loan does not have a prepayment penalty but lenders are charging 4.00% financing costs on new loans. Your opportunity investment rate is 8.5%. a. If you plan to hold the mortgage financing for the next 25 years (whether you refinance or not), what is the NPV of refinancing? Assume that you would refinance the payoff of the existing loan and the new loan amortization would be for 25 years. b. What is the NPV of refinancing if you refinance the payoff of the existing loan for 25 years but you plan to hold the financing for only eight more years?

Please show using Excel.