Loan Amortization (8 Marks)

To expand its operation, International Tools Inc. has applied to the International Bank

for a 3-year, $3,500,000 loan. Make a loan amortization table assuming 10 percent

rate of interest.

a. Calculate the annual, end of year loan repayment.

b. Make a loan amortization schedule showing the interest and principal break down

of each of the three loan repayments.

c. Would you recommend them to go for this loan if the free cash flow for the next

three years is $1,300,000 (each year)?