Mr. Davidson plans to buy a new house in October 2013. The sale price of the house is $436,000. He plans to pay 20% down payments and borrow additional 80% from Bank of America with a 15-year, 3.875% fixed-rate mortgage loan. He is expected to pay an equal MONTHLY payment starting from November 2013 for 15 years.

(1) Calculate the required monthly mortgage payment for Mr. Davidson.

(2) Construct the 2013~2015 amortization table (26 months) for Mr. Davidson.

(3) Mr. Davidson should prepare his 2013 tax filings in early 2014. Please compute the total mortgage interest payments which he can use for his 2013 tax deductions

The MS Energy Corp. is planning a new investment project which is expected to yield cash inflows of $185,000 per year in Years 1 through 2, $220,000 per year in Years 3 through 6, and $198,000 in Years 7 through 9. This investment will cost the company $790,000 today (initial outlay). We assume that the firm's cost of capital is 6.8%.

(1) Draw a time line to show the cash flows of the project.

(2) Compute the project's payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR).

(3) Discuss whether the project should be taken.