Finance Project Part 1

A) What is your monthly payment and can you afford to purchase the car?
Loan Amount
Interest Rate
Months
Payments
Desired Payments
Can you afford the payment? Why?

Period
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60

$32,000.00
1.99%
60
$560.75
$700.00
Yes you can afford it. Your monthly payment is $560.75

Beginning Balance
$32,000.00
$31,492.32
$30,983.79
$30,474.43
$29,964.22
$29,453.16
$28,941.25
$28,428.50
$27,914.89
$27,400.44
$26,885.13
$26,368.97
$25,851.95
$25,334.07
$24,815.33
$24,295.74
$23,775.28
$23,253.96
$22,731.77
$22,208.72
$21,684.80
$21,160.01
$20,634.36
$20,107.83
$19,580.42
$19,052.15
$18,522.99
$17,992.96
$17,462.05
$16,930.26
$16,397.59
$15,864.03
$15,329.59
$14,794.27
$14,258.05
$13,720.95
$13,182.95
$12,644.07
$12,104.29
$11,563.61
$11,022.04
$10,479.57
$9,936.20
$9,391.93
$8,846.75
$8,300.68
$7,753.69
$7,205.80
$6,657.01
$6,107.30
$5,556.68
$5,005.14
$4,452.69
$3,899.33
$3,345.05
$2,789.85
$2,233.73
$1,676.68
$1,118.71
$559.82

Payment
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75
$560.75

Prinicipal
$507.68
$508.52
$509.37
$510.21
$511.06
$511.91
$512.75
$513.60
$514.46
$515.31
$516.16
$517.02
$517.88
$518.74
$519.60
$520.46
$521.32
$522.19
$523.05
$523.92
$524.79
$525.66
$526.53
$527.40
$528.28
$529.15
$530.03
$530.91
$531.79
$532.67
$533.56
$534.44
$535.33
$536.21
$537.10
$537.99
$538.89
$539.78
$540.68
$541.57
$542.47
$543.37
$544.27
$545.17
$546.08
$546.98
$547.89
$548.80
$549.71
$550.62
$551.53
$552.45
$553.36
$554.28
$555.20
$556.12
$557.04
$557.97
$558.89
$559.82

Inrerest
Cumulative Principle
$53.07
$507.68
$52.22
$1,016.21
$51.38
$1,525.57
$50.54
$2,035.78
$49.69
$2,546.84
$48.84
$3,058.75
$47.99
$3,571.50
$47.14
$4,085.11
$46.29
$4,599.56
$45.44
$5,114.87
$44.58
$5,631.03
$43.73
$6,148.05
$42.87
$6,665.93
$42.01
$7,184.67
$41.15
$7,704.26
$40.29
$8,224.72
$39.43
$8,746.04
$38.56
$9,268.23
$37.70
$9,791.28
$36.83
$10,315.20
$35.96
$10,839.99
$35.09
$11,365.64
$34.22
$11,892.17
$33.35
$12,419.58
$32.47
$12,947.85
$31.59
$13,477.01
$30.72
$14,007.04
$29.84
$14,537.95
$28.96
$15,069.74
$28.08
$15,602.41
$27.19
$16,135.97
$26.31
$16,670.41
$25.42
$17,205.73
$24.53
$17,741.95
$23.64
$18,279.05
$22.75
$18,817.05
$21.86
$19,355.93
$20.97
$19,895.71
$20.07
$20,436.39
$19.18
$20,977.96
$18.28
$21,520.43
$17.38
$22,063.80
$16.48
$22,608.07
$15.57
$23,153.25
$14.67
$23,699.32
$13.77
$24,246.31
$12.86
$24,794.20
$11.95
$25,342.99
$11.04
$25,892.70
$10.13
$26,443.32
$9.21
$26,994.86
$8.30
$27,547.31
$7.38
$28,100.67
$6.47
$28,654.95
$5.55
$29,210.15
$4.63
$29,766.27
$3.70
$30,323.32
$2.78
$30,881.29
$1.86
$31,440.18
$0.93
$32,000.00

Cumulative
Interest
Ending Balance
$53.07
$31,492.32
$105.29
$30,983.79
$156.67
$30,474.43
$207.21
$29,964.22
$256.90
$29,453.16
$305.74
$28,941.25
$353.74
$28,428.50
$400.88
$27,914.89
$447.17
$27,400.44
$492.61
$26,885.13
$537.20
$26,368.97
$580.93
$25,851.95
$623.80
$25,334.07
$665.81
$24,815.33
$706.96
$24,295.74
$747.25
$23,775.28
$786.68
$23,253.96
$825.24
$22,731.77
$862.94
$22,208.72
$899.77
$21,684.80
$935.73
$21,160.01
$970.82
$20,634.36
$1,005.04
$20,107.83
$1,038.38
$19,580.42
$1,070.85
$19,052.15
$1,102.45
$18,522.99
$1,133.17
$17,992.96
$1,163.00
$17,462.05
$1,191.96
$16,930.26
$1,220.04
$16,397.59
$1,247.23
$15,864.03
$1,273.54
$15,329.59
$1,298.96
$14,794.27
$1,323.49
$14,258.05
$1,347.14
$13,720.95
$1,369.89
$13,182.95
$1,391.75
$12,644.07
$1,412.72
$12,104.29
$1,432.80
$11,563.61
$1,451.97
$11,022.04
$1,470.25
$10,479.57
$1,487.63
$9,936.20
$1,504.11
$9,391.93
$1,519.68
$8,846.75
$1,534.35
$8,300.68
$1,548.12
$7,753.69
$1,560.98
$7,205.80
$1,572.93
$6,657.01
$1,583.97
$6,107.30
$1,594.09
$5,556.68
$1,603.31
$5,005.14
$1,611.61
$4,452.69
$1,618.99
$3,899.33
$1,625.46
$3,345.05
$1,631.01
$2,789.85
$1,635.63
$2,233.73
$1,639.34
$1,676.68
$1,642.12
$1,118.71
$1,643.97
$559.82
$1,644.90
$0.00

Finance Project Part 1

B) Instead of making the regular payment that you solved for in part a, if you make monthly payments of
$700
how soon will you be able to pay off the car or will you be paying less than your monthly required payment?
Loan Amount
$32,000.00
Interest Rate
1.99%
Months
47.58
Payments
$700.00
Desired Payments
$700.00
Can you afford the payment? Why?
Yes you can afford it. Your monthly payment is $700.00 which is the maximum desired amount

Period
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

Beginning Balance
Payment
Prinicipal
Inrerest
$32,000.00
$700.00
$646.93
$31,353.07
$700.00
$648.01
$30,705.06
$700.00
$649.08
$30,055.98
$700.00
$650.16
$29,405.82
$700.00
$651.24
$28,754.59
$700.00
$652.32
$28,102.27
$700.00
$653.40
$27,448.87
$700.00
$654.48
$26,794.39
$700.00
$655.57
$26,138.83
$700.00
$656.65
$25,482.18
$700.00
$657.74
$24,824.43
$700.00
$658.83
$24,165.60
$700.00
$659.93
$23,505.67
$700.00
$661.02
$22,844.66
$700.00
$662.12
$22,182.54
$700.00
$663.21
$21,519.33
$700.00
$664.31
$20,855.01
$700.00
$665.42
$20,189.60
$700.00
$666.52
$19,523.08
$700.00
$667.62
$18,855.45
$700.00
$668.73
$18,186.72
$700.00
$669.84
$17,516.88
$700.00
$670.95
$16,845.93
$700.00
$672.06
$16,173.87
$700.00
$673.18
$15,500.69
$700.00
$674.29
$14,826.39
$700.00
$675.41
$14,150.98
$700.00
$676.53
$13,474.45
$700.00
$677.65
$12,796.79
$700.00
$678.78
$12,118.01
$700.00
$679.90
$11,438.11
$700.00
$681.03
$10,757.08
$700.00
$682.16
$10,074.92
$700.00
$683.29
$9,391.62
$700.00
$684.43
$8,707.20
$700.00
$685.56
$8,021.64
$700.00
$686.70
$7,334.94
$700.00
$687.84
$6,647.10
$700.00
$688.98
$5,958.13
$700.00
$690.12
$5,268.01
$700.00
$691.26
$4,576.74
$700.00
$692.41
$3,884.33
$700.00
$693.56
$3,190.78
$700.00
$694.71
$2,496.07
$700.00
$695.86
$1,800.21
$700.00
$697.01
$1,103.19
$700.00
$698.17
$405.02
$405.02
$405.02

$53.07
$51.99
$50.92
$49.84
$48.76
$47.68
$46.60
$45.52
$44.43
$43.35
$42.26
$41.17
$40.07
$38.98
$37.88
$36.79
$35.69
$34.58
$33.48
$32.38
$31.27
$30.16
$29.05
$27.94
$26.82
$25.71
$24.59
$23.47
$22.35
$21.22
$20.10
$18.97
$17.84
$16.71
$15.57
$14.44
$13.30
$12.16
$11.02
$9.88
$8.74
$7.59
$6.44
$5.29
$4.14
$2.99
$1.83
Err:502

Cumulative Principle
Cumulative Interest
Ending Balance
$646.93
$53.07
$31,353.07
$1,294.94
$105.06
$30,705.06
$1,944.02
$155.98
$30,055.98
$2,594.18
$205.82
$29,405.82
$3,245.41
$254.59
$28,754.59
$3,897.73
$302.27
$28,102.27
$4,551.13
$348.87
$27,448.87
$5,205.61
$394.39
$26,794.39
$5,861.17
$438.83
$26,138.83
$6,517.82
$482.18
$25,482.18
$7,175.57
$524.43
$24,824.43
$7,834.40
$565.60
$24,165.60
$8,494.33
$605.67
$23,505.67
$9,155.34
$644.66
$22,844.66
$9,817.46
$682.54
$22,182.54
$10,480.67
$719.33
$21,519.33
$11,144.99
$755.01
$20,855.01
$11,810.40
$789.60
$20,189.60
$12,476.92
$823.08
$19,523.08
$13,144.55
$855.45
$18,855.45
$13,813.28
$886.72
$18,186.72
$14,483.12
$916.88
$17,516.88
$15,154.07
$945.93
$16,845.93
$15,826.13
$973.87
$16,173.87
$16,499.31
$1,000.69
$15,500.69
$17,173.61
$1,026.39
$14,826.39
$17,849.02
$1,050.98
$14,150.98
$18,525.55
$1,074.45
$13,474.45
$19,203.21
$1,096.79
$12,796.79
$19,881.99
$1,118.01
$12,118.01
$20,561.89
$1,138.11
$11,438.11
$21,242.92
$1,157.08
$10,757.08
$21,925.08
$1,174.92
$10,074.92
$22,608.38
$1,191.62
$9,391.62
$23,292.80
$1,207.20
$8,707.20
$23,978.36
$1,221.64
$8,021.64
$24,665.06
$1,234.94
$7,334.94
$25,352.90
$1,247.10
$6,647.10
$26,041.87
$1,258.13
$5,958.13
$26,731.99
$1,268.01
$5,268.01
$27,423.26
$1,276.74
$4,576.74
$28,115.67
$1,284.33
$3,884.33
$28,809.22
$1,290.78
$3,190.78
$29,503.93
$1,296.07
$2,496.07
$30,199.79
$1,300.21
$1,800.21
$30,896.81
$1,303.19
$1,103.19
$31,594.98
$1,305.02
$405.02
$32,000.00
$1,305.69
$0.00

Finance Project Part 2

Asset Purchase Price
Lease Payment
Tax Rate
Cost of owning
Required return on lease
WACC
Salvage value

$275,000.00
$100,000.00
40.00%
$9,000.00
11.00%
11.00%
$45,000.00
Year 1
33.33%

MACRS 3 year schedule

Year
0
1
2
3
4
After-tax salvage value
PV of after-tax salavge

Installed Asset
Cost
$275,000.00
$0.00
$0.00
$0.00
$0.00

Depreciation
$0.00
$91,657.50
$122,237.50
$40,727.50
$20,377.50

$27,000.00
###

NAL
Salvage Value
$17,785.74
$17,785.74
$17,785.74
Expected NAL

Lease Payment
(After-tax)
$0.00
$60,000.00
$60,000.00
$60,000.00
$60,000.00

$1,142.86
NAL
$1,142.86
$1,142.86
$1,142.86

Probability
Weighted-Average
30.00%
$17,442.88
50.00%
$17,214.31
20.00%
$17,557.16

Year 2
44.45%

Depreciation tax shield

(After-tax)
$0.00
$54,994.50
$73,342.50
$24,436.50
$12,226.50

Year 3
14.81%

Year 4
7.41%

Operating Costs
Cash Flows
if Owned (After-tax)
PV of Cash Flows
$0.00 $275,000.00 $275,000.00
$5,400.00 -$109,594.50
-$78,281.79
$5,400.00 -$127,942.50
-$91,387.50
$5,400.00 -$79,036.50
-$56,454.64
$5,400.00 -$66,826.50
-$47,733.21