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    Gajender Singh
    This document contains 7 questions related to corporate finance concepts. It calculates future and present values using tables, effective interest rates, loan amortization schedules, and implicit interest rates in investments. Some key calculations include determining the future value of Rs. 10,000 invested at 10% interest for 30 years (Rs. 1,74,490), the effective interest rate of a loan with a 12% nominal rate and quarterly compounding (13%), and the present value of Rs. 10,00,000 to be received in 30 years with a 10% discount rate (Rs. 57,300).

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    32 views2 pages
    This document contains 7 questions related to corporate finance concepts. It calculates future and present values using tables, effective interest rates, loan amortization schedules, and implicit interest rates in investments. Some key calculations include determining the future value of Rs. 10,000 invested at 10% interest for 30 years (Rs. 1,74,490), the effective interest rate of a loan with a 12% nominal rate and quarterly compounding (13%), and the present value of Rs. 10,00,000 to be received in 30 years with a 10% discount rate (Rs. 57,300).

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    This document contains 7 questions related to corporate finance concepts. It calculates future and present values using tables, effective interest rates, loan amortization schedules, and implicit interest rates in investments. Some key calculations include determining the future value of Rs. 10,000 invested at 10% interest for 30 years (Rs. 1,74,490), the effective interest rate of a loan with a 12% nominal rate and quarterly compounding (13%), and the present value of Rs. 10,00,000 to be received in 30 years with a 10% discount rate (Rs. 57,300).

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    32 views2 pages

    Docx

    Uploaded by

    Gajender Singh
    This document contains 7 questions related to corporate finance concepts. It calculates future and present values using tables, effective interest rates, loan amortization schedules, and implicit interest rates in investments. Some key calculations include determining the future value of Rs. 10,000 invested at 10% interest for 30 years (Rs. 1,74,490), the effective interest rate of a loan with a 12% nominal rate and quarterly compounding (13%), and the present value of Rs. 10,00,000 to be received in 30 years with a 10% discount rate (Rs. 57,300).

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    Corporate Finance Assignment 2

    Vignesh SI
    1. Calculating future value of single investment
    If you invest Rs 10000 today at a compound interest of 10%
    what will be its future value after 30 years?
    Calculate value of 10000(1.10)30

    = 10000(17.449) = Rs 174490

    30
    For finding the value of 1.10 use future value table where

    r= 10% and n= 30

    2. Calculating effective rate of interest


    If a borrower offers 12% nominal rate of interest with quarterly compounding what is the effective rate

    of interest?
    4 4
    [ 1+ 0.12/4] - 1 = (1.03) - 1 = 1.1255- 1 = 0.13 = 13%
    3. Calculating future value of annuity
    15 annual payments of Rs 5000 are made into a deposit account thatt pays 15% interst per year.Calculate

    future value of annuity.


    As per FVIFA table for FVIFA 15%,15 = 47.580
    future value = 5000 * 47.580 = Rs 2,37,900

    4. Calculating implicit interest rate in an investment


    A finance company offers a lump sum payment of Rs 44650 at the end of 5 years who deposit annually

    Rs 7000 for 5 years. Calculate the implicit interest rate.


    Rs 7000 (FVIFA) = Rs 44,650
    FVIFA = 44650/7000 = 6.3785
    Locate the FVIFA in future value table where n = 5 we find
    r= 12%
    Implicit rate of interest= 12%
    5. Calculating present value of amount receivable in future
    What is the present value of Rs 10,00,000 receivable 30 years from now if the discount rate is 10%
    30
    10,00,000(1/10) Locate r=10 & n =30 on PVIF table = 0.057
    10,00,000(0.057) = Rs 57300
    6. Calculating present value of future cash flow stream

    This study source was downloaded by 100000834150619 from CourseHero.com on 04-22-2022 21:23:34 GMT -05:00

    https://www.coursehero.com/file/22248872/CF2-Vignesh/
    Calculate present value of the following cash stream if the discount rate is 15%

    Year 0 1 2 3 4

    cash flow 6000 7000 7000 8000 8000

    Answer

    PVIF
    Year Cash flow (14,n) Present value

    0 6000 1.000 6000

    1 7000 0.8696 6087.2

    2 7000 0.7561 5292.7

    3 8000 0.6575 5260

    4 8000 0.5718 4574.4

    Total 36000 27214.3


    7. Loan Amortization Schedule

    14% interest and the loan is to be paid in 5 equal


    If a firm borrows Rs 15,00,000 @

    annual instalments. Prepare a loan amortization schedule


    Loan amount = Equated annual instalment * PVIFA 14,5
    15,00,000 = EAI * 3.433
    EAI = 15,00,000/3.433 = 436936
    Loan amortization schedule
    Year O.Bal EAI Interest Principal C.Bal
    1 15,00,000 4,36,936 2,10,000 2,26,936 12,73,06
    4
    2 12,73,064 4,36,936 1,78,229 2,58,707 10,14,35
    7
    3 10,14,357 4,36,936 1,42,010 2,94,926 7,19,431
    4 7,19,431 4,36,936 3,36,215 3,83,285
    1,00,721
    5 3,83,285 4,36,936 53,651 3,83,285 0

    This study source was downloaded by 100000834150619 from CourseHero.com on 04-22-2022 21:23:34 GMT -05:00

    https://www.coursehero.com/file/22248872/CF2-Vignesh/
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