Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Gizmo, a small manufacturing company whose management wishes to reduce overhead by installing a new, energy efficient heating system. The new system costs $100K. due

Gizmo, a small manufacturing company whose management wishes to reduce overhead by installing a new, energy efficient heating system. The new system costs $100K. due to the companys insufficient cash reserves, the management has decided that borrowing money is the only way to finance the desired improvement. A problem arises when Gizmos accountant points out that a standard direct reduction loan would severely strain the firms cash flow during the heating season. In order to overcome this difficulty, the accountant suggests a periodic linear gradient series repayment scheme (G=$75) in a skip payment loan @ 12% APR compounded monthly. Month Repayment January-August Yes September-April Skip May-September Yes October-March Skip April-October Yes November-February Skip March-December Yes

1. Develop a worksheet repayment schedule for 4 years.

2. Select the BB case question link to enter the following information: a. Initial payment, Month #1 (first Jan payment) b. Last payment, Month #48 c. Interest charged during Month #48 d. % of PMT applied towards paying down the principal in Month #1 e. % of PMT applied towards paying down the principal in Month #48 f. Total interest paid at the end of the loan

3. Once you receive your feedback on BB and you are satisfied with the results, submit your worksheet with the drop box link provided in the folder for full credit.

Loan Amount $50,000.00 Total PMT Starting PMT
Monthlhy Linear Increase $75.00 Total INT Ending Balance
APR Compounded Monthly 12.000% Effective Annual INT Monthly Interest
PMT? Sum PMT Payment
Period Year Month Yes=1 Increments Amount Starting Bal Plus Interest Less PMT Ending Balance INT:PMT PMT To Prin
0 0 Dec 0 $50,000.00
1 1 Jan 1 $50,000.00 $0.00 $0.00 $50,000.00
2 1 Feb 1
3 1 Mar 1
4 1 Apr 1
5 1 May 1
6 1 June 1
7 1 July 1
8 1 Aug 1
9 1 Sept 0
10 1 Oct 0
11 1 Nov 0
12 1 Dec 0
13 2 Jan 0
14 2 Feb 0
15 2 Mar 0
16 2 Apr 0
17 2 May 1
18 2 June 1
19 2 July 1
20 2 Aug 1
21 2 Sept 1
22 2 Oct 0
23 2 Nov 0
24 2 Dec 0
25 3 Jan 0
26 3 Feb 0
27 3 Mar 0
28 3 Apr 1
29 3 May 1
30 3 June 1
31 3 July 1
32 3 Aug 1
33 3 Sept 1
34 3 Oct 1
35 3 Nov 0
36 3 Dec 0
37 4 Jan 0
38 4 Feb 0
39 4 Mar 1
40 4 Apr 1
41 4 May 1
42 4 June 1
43 4 July 1
44 4 Aug 1
45 4 Sept 1
46 4 Oct 1
47 4 Nov 1
48 4 Dec 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Supply Chain Finance And Blockchain Technology The Case Of Reverse Securitisation

Authors: Erik Hofman, Urs Magnus Strewe, Nicola Bosia

1st Edition

3319623702, 978-3319623702

More Books

Students also viewed these Finance questions