Question
A company has Rs. 20,00,000 15% loan borrowed from State Bank of India on the 1st July, 2010 for a term of 8 years. The
A company has Rs. 20,00,000 15% loan borrowed from State Bank of India on the 1st July, 2010 for a term of 8 years. The loan is repayable as lump-sum at the end of the term. The Board of Directors have decided to set aside a sinking fund to repay the loan without facing cash crunch in that year and invest the same in Reliance Mutual Fund with a promised return of 12% to 18%. The amount has to be withdrawn from the profits earned during the year and invest at the end of each year. What will be the annual amount that the firm should draw from the profit and loss account each year to repay the designated loan?
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