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Extra Exercises For PPMT - IPMT

The document provides 6 examples of calculations related to IPMT and PPMT for loans. It asks the reader to calculate annual principal and interest payments as well as total annual repayments for loans with different amounts, interest rates, and repayment periods. It also includes an example of calculating the annual equivalent cost of a cash flow stream using annuity factors and the Excel PMT function.

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133 views1 page

Extra Exercises For PPMT - IPMT

The document provides 6 examples of calculations related to IPMT and PPMT for loans. It asks the reader to calculate annual principal and interest payments as well as total annual repayments for loans with different amounts, interest rates, and repayment periods. It also includes an example of calculating the annual equivalent cost of a cash flow stream using annuity factors and the Excel PMT function.

Uploaded by

qpqpqpqpqp
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Extra exercises for IPMT & PPMT calculations

1. Suppose that a firm has borrowed $510,000 in the current year at 7.5% interest rate, with a commitment to repay the loan (principal and interest) in equal annual instalments over the following 7 years. Calculate: a. The amount of the annual principal repayment b. The stream of interest payments c. The stream of total annual repayments 2. Suppose a firm plans to finance a project by borrowing $2.5 million from the Bank at a real interest rate of 8.5% per annum repayable in 15 years. Calculate a. The amount of the annual principal repayment b. The stream of interest payments c. The stream of total annual repayments 3. Suppose a firm plans to finance a project by borrowing $72,000 from the Bank at a real interest rate of 3.5% per annum repayable in 20 years. Calculate a. The amount of the annual principal repayment b. The stream of interest payments c. The stream of total annual repayments 4. Suppose that a firm has borrowed $1000 in the current year at a 10% interest rate, with a commitment to repay the loan (principal and interest) in equal annual instalments over the following five years. Calculate: a. The amount of the annual repayment; b. The stream of interest payments which can be entered in the tax calculation of the private benefit-cost analysis. c. The stream of total annual repayments 5. Suppose a firm borrows $12,000 in 3 equal disbursements (at years 0, 1, 2), at an interest rate of 7%, with a commitment to repay the loan (principal and interest) in equal annual instalments over 10 years. From a borrowers perspective calculate: a. The amount of the annual repayment; b. The stream of interest payments which can be entered in the tax calculation of the private benefit-cost analysis. c. The stream of total annual repayments Hint: You need to first calculate the present value of the loan amount in year 0, and use it to calculate principal & interest repayments. 6. If a firms cash flow is
Year Cash flow 0 1 -10000 -2000 2 1000 3 1000 4 1000 5 2000 6 2000 7 2000 8 3000 9 3000 10 3000

a. Calculate the annual equivalent cost using 2 methods (Hint: annuity factors & pmt)

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