SEMINAR QUESTIONS - Valuation of Loan Capital Question 1 Chiltern plc needs a sum of 21 million for an investment project, and to raise the required funds a bank term loan could be raised at an interest rate of 6% per annum. Two alternative repayment terms are available for such a term loan: a) Repayment of the principal in four equal instalments at the end of each year, with interest being paid at the end of each year on the reducing balance. b) Repayment of the principal and interest in four equated annual instalments (i.e. an amortized loan). What is the capital/interest split for each of the 4 equated payments? Estimate the cash outflows under the 6% per annum bank loan on each of the terms