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B C D 2 Patrick is a recently divorced single father and will be filing head of household and itemizes. As a result of the divorce from his husband he will need to 3 refinance the mortgage on the home. The bank has offered Patrick the option of paying points on the mortgage in order to receive an annual interest rate 4 reduction. Patrick will also make interest-only payments for the first four years. Patrick has asked you to produce a calculation to assist in determining whether or not paying points makes the most financial sense from a tax perspective. 5 6 7 8 Required: 9 1. Complete the analysis using formulas and references to the data provided in E14:E20. 10 11 (HINT: Annualize the break-even years using 365 days to determine the Break-Even Date) 12 13 14 Mortgage Amount 15 Proposed Points 16 Net After-Tax Cost of Points 17 Annual Interest Rate Savings 18 Less: Lost tax benefit of higher interest 19 Net After-Tax Savings of Lower Interest 20 Point Amortization Tax Benefit 21 Annual After-Tax Benefit of Points 22 23 24 Break-Even Point of Paints: Break-Even Date Years Mortgage: S Points Rate with Points 240,000 4 4.75% Rate without Points Mortgage Length (Years):) 5.25% 30 Marginal Tax Rate Start Date: 24.00% 4/1/2023 Unde A1 Paste Copy Format Painter Clipboard BIUDA Fort Jx A B C D Merge & Center Conditional Format As Styles Formatting Table Insert Number Styles G H 1 2 3 Patrick is a recently divorced single father and will be filing head of household and itemizes. As a result of the divorce from his husband he will need to refinance the mortgage on the home. The bank has offered Patrick the option of paying points on the mortgage in order to receive an annual interest rate 4 reduction. Patrick will also make interest-only payments for the first four years. Patrick has asked you to produce a calculation to assist in determining 5 whether or not paying points makes the most financial sense from a tax perspective. 6 7 8 Required: 9 1. Complete the analysis using formulas and references to the data provided in E14 E20. 10 11 (HINT: Annualize the break-even years using 365 days to determine the Break-Even Date) 12 13 14 Mortgage Amount 15 Proposed Points 16 Net After-Tax Cost of Points 17 Annual Interest Rate Savings 18 Less: Lost tax benefit of higher interest 19 Net After-Tax Savings of Lower Interest 20 Point Amortization Tax Benefit 21 Annual After-Tax Benefit of Points 22 23 24 25 Break-Even Point of Points: Years Break-Even Date Mortgage: S Points 240,000 4 Rate with Points 4.75% Rate without Points Mortgage Length (Years) 5.25% 30 Marginal Tax Rate: Start Date 24.00% 4/1/2023 26 27 Students: The scratchpad area is for you to do any additional work you need to solve this question or can be used to show your work 28 Nothing in this area will be graded, but it will be submitted with your assignment 29 30 31 BGraded Worksheet + Calculation Mode Automatic Workbook Statistics 53F O Search L a +

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