Answer:
Ann s annualized IRR from refinancing is -0.0960
Explanation:
A / 1 B C D E F G H
2 Ann
3 FRM duration in years 30
4 Annual payment $ 12,000
5 Total Payments for 30 years $360,000
6 Payments made for 2 years
7 Payment amount for 2 year $24,000
8 after two years FRM outstanding $336,000
9
10 Refinancing is done for 28 years
11 Annual payment $10,000
12 Total Payments for 28 years $ 280,000
13 Refinancing Cost $2,500
14 Total amount of cost $282,500
15 Balance outstanding before refinancing 336,000
16 Amount 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
