Casino.

com Corporation is building a $25 million office building in Adelaide and is financing the
construction at an 80 % loan-to-value ratio, where the loan is in the amount of $20,000,000. This
loan has a ten-year maturity, calls for monthly payments, and is contracted at an interest rate of
8% pa.

Using the above information, answer the following questions.

1. What is the monthly payment?
2. How much of the first payment is interest?
3. How much of the first payment is principal?
4. How much will Casino.com Corporation owe on this loan after making monthly payments for
three years (the amount owed immediately after the thirty-sixth payment)?
5. Should this loan be refinanced after three years with a new seven-year 7 per cent loan, if the
cost to refinance is $250,000? To make this decision, calculate the new loan payments and
then the present value of the difference in the loan payments.