You may use your financial calculator or excel for calculations but be sure to show your work (i.e. rate, periods, payments, etc.). For the amortization schedules be sure to print the schedule so all columns fit on one page. For the amortization schedule required for question 4 c, only include the first and last pages of the schedule.

1. Matt Ryan just found out he won $2,500,000 from the lottery. He has two options for receiving the prize. First, if he takes the money today, the state and federal government will take out 40% immediately. His second option is to receive a payout of 20 equal installments of $145,000 with the first payment occurring when Matt turns in the winning ticket. Each of these payments will be taxed at a combined state and federal rate of 27%. Assuming Matt can earn a 3% rate of return on any money invested during this period, which option should he choose? Why? Show your work.

2. Josh Allen is the sole proprietor of Allen Enterprises. He is exploring the option of going public because his company is growing exponentially. The consulting firm that is reviewing his financials has questioned whether Allens CFO is technically competent enough to be the CFO of a publically traded company, as they believe he made several bad financial decisions. The two situations, which the firm brings to Joshs attention, are as follows: a) Allen purchased the building in which their corporate office is housed on 1/1/16 for $4,500,000. They put down $900,000 cash and had to borrow the remaining amount at 5% over a 20-year term. At the time of the purchase, they had the option to lease the building. The 20-year lease would begin on 1/1/16 and called for annual payments of $350,000 beginning on that date for the first 10 years and payments of $300,000 beginning on 1/1/26 for the remaining 10 years of the lease. Allen had the option to purchase the building for $1 on December 31, 2035 at the end of the lease. Did the CFO make the right decision by purchasing the building? Why or why not? Show your work. b) This year, the company sold land for a non-interest bearing note. The note calls for annual payments of $20,000 for 5 years. The payments will begin one year from the date of the sale. An appropriate rate of interest for this type of note is 4%. The land had an original purchase cost of $90,000. The CFO told the accounting department to record the sale as follows: Notes Receivable $100,000 Land $90,000 Gain on Sale of Land $ 10,000 Was this entry correct? If not, provide the correct entry.

3. Joe Burrow loans Kenyan Drake $400,000. Burrow accepts a 5% note, which requires quarterly interest payments for 10 years. The day after receiving the 6th interest payment, Burrow decides to sell the note to Rockland Trust. Rockland Trust agrees to purchase it to yield an 8% return. a. What is the amount that Joe Burrow will receive on the sale of the note to Rockland Trust? b. Prepare the entries that Joe Burrow and Rockland Trust will make on the day the note is sold to the bank.

4. Breece Hall is interested in buying a waterfront condo and has saved $100,000 for the down payment. His plans call for making additional monthly deposits into an investment account over the next 36 months. Breece Hall wants to make the purchase 48 months from today and wants to have $180,000 saved up for the down payment. a. What is the amount of each of the additional payments he must make for his plan to work out? Assume Breece can earn 2% annual return in his investment account. b. If Breece takes out a 30-year, $720,000 mortgage at 4%, what will his mortgage payments be? c. Prepare an amortization schedule to prove that your answer is right and his mortgage will be paid off in 30 years. d. If Breece takes out a 20-year, $720,000 mortgage at 3.5%, what will his mortgage payments be? e. How much would Breece save if he took out a 20-year mortgage versus a 30-year mortgage?