Eric Mathis is considering refinancing his home mortgage to reduce his house payment by $75 per month.
Question:
Eric Mathis is considering refinancing his home mortgage to reduce his house payment by $75 per month. Closing costs associated with the refinancing will total $3,750. Eric will finish graduate school in three years, at which time he will sell the house and move to another state.
Required
a. What is the payback period for refinancing this loan?
b. Given Eric's plans, should he refinance his mortgage at this time? Why or why not?
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...
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a Notice the savings amount is expressed in months therefore th...View the full answer
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