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Financial Calculation

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Enicha Hussien
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5 views2 pages

Financial Calculation

Uploaded by

Enicha Hussien
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Amount financed: $62,500, or 50% of total capital expenditure Financing rate: 10% per year,

Annual installment: $16,487 or, A = $62,500(A/P, 10%, 5,calculate beginning balance, interest
payment, principal payment and ending balance.

To calculate the beginning balance, interest payment, principal payment, and ending balance for
each year of the loan, we can use the following formulas:

1. Beginning Balance: This is the amount of the loan at the start of the year.
2. Interest Payment: This is calculated as:-

Interest Payment=Beginning Balance×Interest Rate

3. Principal Payment: This is calculated as:


Principal Payment=Annual Installment−Interest Payment
4. Ending Balance: This is calculated as:
Ending Balance=Beginning Balance−Principal Payment

Let's perform the calculations for each year of the 5-year loan term.

Given Data

x Amount Financed (Loan Amount): $62,500


x Interest Rate: 10% per year (0.10)
x Annual Installment (A): $16,487
x Loan Term: 5 years

Now, we can calculate these values step by step for each year.

Yearly Calculations

1. Year 1:
x Beginning Balance: $62,500
x Interest Payment: 62,500×0.10=6,25062,500 \times 0.10 = 6,25062,500×0.10=6,250
x Principal Payment: 16,487−6,250=10,23716,487 - 6,250 = 10,23716,487−6,250=10,237
x Ending Balance: 62,500−10,237=52,26362,500 - 10,237 = 52,26362,500−10,237=52,263
2. Year 2:

x Beginning Balance: $52,263


x Interest Payment: 52,263×0.10=5,226.3052,263 \times 0.10 =
5,226.3052,263×0.10=5,226.30
x Principal Payment: 16,487−5,226.30=11,260.7016,487 - 5,226.30 =
11,260.7016,487−5,226.30=11,260.70
x Ending Balance: 52,263−11,260.70=41,002.3052,263 - 11,260.70 =
41,002.3052,263−11,260.70=41,002.30
Year 3:

x Beginning Balance: $41,002.30


x Interest Payment: 41,002.30×0.10=4,100.2341,002.30 \times 0.10 =
4,100.2341,002.30×0.10=4,100.23
x Principal Payment: 16,487−4,100.23=12,386.7716,487 - 4,100.23 =
12,386.7716,487−4,100.23=12,386.77
x Ending Balance: 41,002.30−12,386.77=28,615.5341,002.30 - 12,386.77 =
28,615.5341,002.30−12,386.77=28,615.53

Year 4:

x Beginning Balance: $28,615.53


x Interest Payment: 28,615.53×0.10=2,861.5528,615.53 \times 0.10 =
2,861.5528,615.53×0.10=2,861.55
x Principal Payment: 16,487−2,861.55=13,625.4516,487 - 2,861.55 =
13,625.4516,487−2,861.55=13,625.45
x Ending Balance: 28,615.53−13,625.45=14,990.0828,615.53 - 13,625.45 =
14,990.0828,615.53−13,625.45=14,990.08

Year 5:

x Beginning Balance: $14,990.08


x Interest Payment: 14,990.08×0.10=1,499.0114,990.08 \times 0.10 =
1,499.0114,990.08×0.10=1,499.01
x Principal Payment: 16,487−1,499.01=14,987.9916,487 - 1,499.01 =
14,987.9916,487−1,499.01=14,987.99
x Ending Balance: 14,990.08−14,987.99=2.0914,990.08 - 14,987.99 =
2.0914,990.08−14,987.99=2.09 (approximately 0)

Summary of Results

At the end of the 5 years, the loan balance is almost paid off (approximately $2.09). If you need
any further calculations or details, let me know!

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