Business, 10.11.2019 01:31 bxbysoso

Ann got a 30 year frm with annual payments equal to $12,000 per year. after 2 years of payments ann will refinance the balance into a 28 year frm with annual payments equal to $10,000 per year. refinancing will cost ann $2,500. ann will prepay the new loan 3 years after refinancing. she will save $4,000 on her loan balance when she prepays. what is ann s annualized irr from refinancing?

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Answer from: Gutierrezarlene4595

Ann s annualized IRR from refinancing is -0.0960

Explanation:

A / 1B C DEFGH

2Ann

3FRM duration in years 30

4Annual payment$ 12,000

5Total Payments for 30 years $360,000

6Payments made for 2 years

7Payment amount for 2 year $24,000

8 after two years FRM outstanding $336,000

10Refinancing is done for 28 years

11Annual payment $10,000

12Total Payments for 28 years$ 280,000

13Refinancing Cost $2,500

14Total amount of cost $282,500

15 Balance outstanding before refinancing 336,000

16Amount saved at the end of 2nd year $53,500 period cashflow cash payment cost of refinance prepayment NetFlow

0 360,000 360,000

1 (12,000.0) (12,000)

2 (12,000.0) (2,500) (14,500)

3 280,000.0 (10,000) (336,000)(66,000)

4 (10,000) (10,000)

5 (10,000) (246,000) (256,000)

640,000(54,000) (2,500) (582,000) 1,500

IRR = -0.0960%

Therefore, Ann s annualized IRR from refinancing is -0.0960

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Answer from: Quest

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