# HW1.pdf - Guanghua School of Management Course No 02833430...

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Guanghua School of Management Course No.: 02833430 Corporate Finance, Fall 2014 Homework 1 Due in class on September 30th Problem 1 . Beckham is considering buying a new car. He can take out a 48-month car loan for \$8239.05 with a 14.2% annual interest rate. He then needs to make a constant loan payment each month. (a) Calculate the monthly payment that Beckham will need to make on his car loan. ( Hint: think about the mortgage payment example in the class with "payment frequency" ) (b) What is the total amount that Beckham would have paid on his loan in 48 months? Problem 2. Candy Messinger is searching for good investments to place her firm’s capital in. She is the CEO and president of GSM Consulting and must decide which one of the following projects to invest in. Given below are the projects’ cash flows; all require the same initial investment of \$2 billion (\$2000 million). The appropriate discount rate for all projects is 12%. Project 1 Project 2 Project 3 Initial Investment \$-2,000 \$-2,000 \$-2,000 Year 1 330 0 280 2 330 0 280 3 330 0 280 4 330 0 280 5 330 0 280 6 330 0 280

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