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Fundamentals of Corporate Finance, 4/c/e

Fundamentals of Corporate Finance, 4/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University

Discounted Cash Flow Valuation

Internet Application Questions


1		Buying a house frequently involves borrowing a significant portion of the house price from a lending institution such as a bank. Often times, the bank provides repayment of the loan based on long amortization periods. The following site maintained by Royal LePage shows the effect of increasing your monthly payment on the amortization period. http://www.royallepage.ca/Mortgages/calculators.htm Note that increasing the monthly payment has a disproportionate impact on reducing the amortization period. Can you explain why this happens?



2		Toyota of Canada offers its own financing plans that may sometimes compare favorably to bank financing. Pick a vehicle from this website, and use Toyota's pricing calculator to estimate your monthly financing payment for this car. Assume zero down payment. How does Toyota's financing compare with the lending rates at CIBC? What is the present value of your savings if you choose to finance through Toyota?

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