Ku Fin 701 Lawrence Final Project
Ku Fin 701 Lawrence Final ProjectFinal Project
This is an INDIVIDUAL project.
Show each and every detail computation on the cases. If you use a financial calculator, write down each and every keystroke. Even if you have the correct answer, if your detail work is not clearly labeled and easy to follow, your response will be scored zero.
University of Kansas School of Business Honor Code
Please read and sign the pledge below. If you leave this unsigned, your project will not be graded nor returned to you until you contact me to discuss why.
“On my honor, I have neither given nor received any unauthorized aid on this project. Nor am I aware of anyone giving or receiving any unauthorized aid on this project.”
Case #1 “S&S Air’s Mortgage” (20 points)
Mark Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris’s analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipment is sufficient, but it is time to acquire a bigger manufacturing facility. Mark and Todd have identified a suitable structure that is currently for sale, and they believe they can buy and refurbish if for about $22 million. Mark, Todd, and Chris are now ready to meet with Christie Voughan, the loan officer for First United National Bank. The meeting is to discuss the mortgage options available to the company to finance the new facility.
Christie begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equal monthly installments. Because of the previous relationship between S&S Air and the bank, there would be no closing costs for the loan. Christie states that the APR of the loan would be 6.1 percent. Todd asks if a shorter mortgage loan is available. Christie says that the bank does have a 20-year mortgage available at the same APR.
Mark decides to ask Christie about a “smart loan” he discussed with a mortgage broker when he...