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100000
0.09
5
=PMT(Interest,Term,-PV)
25,709.25
2 Amortisation schedule
Inst.no
0
1
2
3
4
5
3a
3b
Principal
Interest
100000
16,709.25
18,213.08
19,852.25
21,638.96
23,586.46
0.09
9,000.00
7,496.17
5,856.99
4,070.29
2,122.78
An initial loan of Rs. 100000 is given to a customer with the explicit option for
the customer to repay principal anytime any amount. Develop a model to incorporate
this payment adjusting the remaining EMI without changing the time period
Loan amount
Tenue
Interest
EMI
In the same problem, if the emi is to be retained and the period is to be adjusted,
how will you change the model?
Loan amount
Tenure
Interest
EMI
2
3
4
5
100000
5
0.14
$29,128.35
100000
5
0.14
$29,128.35
cash flows
-140000
40000
40000
40000
40000
60000
=irr(cash flow range)
100000
0.2
5
years
Pattern of payments
1
1
1
1
1
0
0
1
1
1
0
1
0
1
0
Term
0
1
2
3
4
5
Pv of Rs.1
Pattern
Total of PV of pattern
Amount to be recovered
Accelerated recovery
A company wants a loan of 1000000, to be recovered in 5 instalments with every instalment
increasing at a rate of 8%. If the lender's IRR is 12 %, show the recovery schedule
Amount of loan
1000000
Rate of acceleration
0.08
Lender's IRR
0.12
7 A company wants to structure its repayment of the loan to its core risk, which is measured
by the commodity price index. It wants a loan 20 million to be repaid in six instalments but the
amount of instalment will vary depending on the movements in the commodity price index.
The instalment will go up or down depending on the rate of decrease or increase in the price index
Construct a model to implement this scheme
Amount of loan
2000000
Required irr
0.15
term
6
6
Cost of Capital
Net Present Value =npv(cost of capital,cash flow range)+initial investment
Internal Rate of Return
=IRR(cashflow range)
9
Year
Cashoutflows
0
1
2
3
4
5
6
Inflows
-100000
-25000
-15000
60000
40000
30000
35000
35000
30000
20000
Cost of capital
0.15
A hire purchase financier approaches you with the following terms for financing an asset
worth Rs.100,000:
Simple Interest over Rs.100,000
For 1 year, 10%
For 2 years, 20%
For 3 years, 30%
He recovers the total amount (principal + interest) in equal monthly instalments. What is
the effective interest charged by the financier in the 3 cases?
Outflows
(200,000.00)
(25,000.00)
(10,000.00)
Inflows
60,000.00
56,000.00
65,000.00
70,000.00
40,000.00
40,000.00
30,000.00
30,000.00
20,000.00
10
21,000.00
COC
NPV
IRR
NPV
12.00%
13.00%
Investments
-180000
-220000
-240000
-260000
-180000
-220000
-240000
-260000
12 MIRR(modified internal rate of return)
Check the reinvestment assumption of IRR
0
1
2
3
4
5
IRR
MIRR
13 XIRR(Uneven period cash flows)
-100000
45000
49000
20000
30000
25000
-100000
25000
30000
35000
24000
20000
IRR
COC
NPV
0.1
e of money-applications
EMI
$2,075.84
Instalment
25,709.25
25,709.25
25,709.25
25,709.25
25,709.25
16%
Balance
100000
83,290.75
65,077.68
45,225.42
23,586.46
0.00
0
0
0
1
1
Pv of pattern
1
1
1
0
0
Crosscheck
, which is measured
n six instalments but the
mmodity price index.
or increase in the price index
Cashflow pattern
-100000
30000
35000
40000
25000
25000
0.13
Netflows
-100000
35000
25000
30000
35000
35000
30000
20000
cing an asset
0.18
Netflows
(200,000.00)
35,000.00
46,000.00
65,000.00
70,000.00
40,000.00
40,000.00
30,000.00
30,000.00
20,000.00
21,000.00
0.10
14.50%
15.00%
Scenario Analysis
Outflows
(197,182.00)
(20,000.00)
(10,000.00)
45,274.00
57,322.00
65,000.00
70,000.00
40,000.00
40,000.00
30,000.00
30,000.00
20,000.00
21,000.00
Inflows
0.2
Netflows
(197,182.00)
25,274.00
47,322.00
65,000.00
70,000.00
40,000.00
40,000.00
30,000.00
30,000.00
20,000.00
21,000.00
COC
NPV
IRR
0.10
Scenario-2
-205000
0.11
52000
57000
Scenario-3
-220000
0.14
45000
52000
0.4
0.6
best case
-180000
60000
60000
0.09
Page 12
worst case
-220000
45000
52000
0.14
Page 13