QUESTION
- You work in the mortgage division of a bank and are asked to draw the amortization schedule of $250,000, 15-year loan priced at 7.5%. There is no penalty on the prepayment of principal. Provide appropriate headings for the amortization schedule.
- Assuming that there is no prepayment and the payments are annual:
- Calculate the annual payment.
- Calculate the total interest paid over 15 years (do not adjust for time value of money).
- What is the outstanding principal at the end of 5, 10 and 15 years?
- Assuming no principal prepayments and monthly payments,
- Calculate the monthly payment.
- Calculate the total interest paid over 15 years (do not adjust for time value of money).
- What is the outstanding principal at the end of 5, 10 and 15 years?
- Assume monthly payments. Also assume that after two years, the borrower will prepay $250 per month. Adjust your amortization schedule
- How many months will it take for the borrower take care of all the interest and principal payments?
- Calculate the total interest paid (do not adjust for time value of money).
- What is the outstanding principal at the end of 5 and 10 years?
- Are the answers in a(ii), b(ii) and c(ii) different?
- Explain your answer in d.
- Assuming that there is no prepayment and the payments are annual:
- Your retirement is 20 years away and you are interested in saving for your retirement. You expect another fifteen years to live after retirement. You think you will need 60,000 dollars every year to live post retirement. You have to estimate how much you should save annually if
- You expect a rate of return of 8% for the next 35 years, and
- You expect to earn 9% for the next 20 years. At retirement you put your money in an investment that gives you a 4.5% return.
- Discuss the two options and recommend which one is a better option.
- Consider the data in the provided in the data General Electrics. Estimate the following:
- Compounded annual growth rate in dividends
- Average annual growth rate in dividends
- Which of these two rates will you use for the Gordon Growth model, and why?
- Expected dividend in 2008
- The expected price in the beginning of 2008, if your expected rate of return in the past 20 years average return.
- The beta of stock.
- Is GE a defensive or aggressive stock? Explain your answer.
- If the next year’s expected return on the market is expected to be 5%, and the risk free rate is expected to be 3%, what rate of return would you expect on GE?
Month | Day | Year | Ticker | Ret | Adjdiv | Market |
12 |
31 | 1986 | GE |
21.83% |
0.0988 |
15.65% |
12 |
31 | 1987 | GE |
5.29% |
0.1104 |
1.74% |
12 |
30 | 1988 | GE |
4.86% |
0.1217 |
17.61% |
12 |
29 | 1989 | GE |
48.71% |
0.1417 |
28.48% |
12 |
31 | 1990 | GE |
-8.13% |
0.1600 |
-6.08% |
12 |
31 | 1991 | GE |
37.37% |
0.1733 |
33.78% |
12 |
31 | 1992 | GE |
15.10% |
0.1933 |
9.06% |
12 |
31 | 1993 | GE |
26.04% |
0.2175 |
11.59% |
12 |
30 | 1994 | GE |
0.21% |
0.2483 |
-0.64% |
12 |
29 | 1995 | GE |
45.13% |
0.2817 |
35.73% |
12 |
31 | 1996 | GE |
40.28% |
0.3167 |
21.23% |
12 |
31 | 1997 | GE |
50.95% |
0.3600 |
30.43% |
12 |
31 | 1998 | GE |
40.99% |
0.4167 |
22.34% |
12 |
31 | 1999 | GE |
53.56% |
0.4867 |
25.68% |
12 |
29 | 2000 | GE |
-6.00% |
0.5700 |
-11.25% |
12 |
31 | 2001 | GE |
-15.07% |
0.6600 |
-11.07% |
12 |
31 | 2002 | GE |
-37.71% |
0.7300 |
-20.88% |
12 |
31 | 2003 | GE |
30.75% |
0.7700 |
33.15% |
12 |
31 | 2004 | GE |
20.68% |
0.8200 |
13.02% |
12 |
30 | 2005 | GE |
-1.43% |
0.9100 |
7.31% |
12 |
29 | 2006 | GE |
9.35% |
1.0300 |
16.24% |
- You are provided with the last two years financial statements of a chain of fast food restaurant which is being evaluated as a takeover target by your client. You are asked to determine an appropriate price for the chain.
-
XYZ Inc.
Balance Sheet for Year 1 and Year 2
Year Y1
Y2
Current Assets Cash and cash equivalence 164,964 467,649 Accounts receivables 335,677 648,010 Inventory 126,477 508,220 Total current Assets 627,118 1,623,879 Property and equipment At cost 3,570,000 8,756,733 Less accumulated depreciation 357,000 973,337 Net property and equipment 3,213,000 7,783,397 Total Assets 3,840,118 9,407,276 Current Liabilities Accounts payable and accrued expenses 475,990 1,684,705 Other current liability 27,778 77,862 Total current liabilities 503,768 1,762,567 Long term debt 444,180 4,427,905 Stockholder’s equity Common stock 2,420,774 2,420,774 Retained Earnings 471,395 796,029 Total Equity 2,892,170 3,216,804 Total Liabilities and equity 3,840,118 9,407,276
-
XYZ Inc.
Income Statement for Year 1 and Year 2
Sales Sales 3,372,371 5,476,925 Other Income 72,886 97,742 Total Sales 3,445,257 5,574,667 Operating expenses Cost of products sold 1,366,116 2,175,456 Depreciation 357,000 616,337 Selling, general, and administrative expenses 1,035,971 1,677,590 Interest expense 39,976 398,511 Interest income 8,248 18,735 Total Expenses 2,790,815 4,849,159 Earnings before income taxes 654,443 725,508 Income taxes 268,322 290,203 Profit after taxes 386,121 435,304 Dividends 98,166 110,671 Addition to Retained earnings 287,955 324,634
Based on the balance sheet and income statements and your own judgment you make the following assumptions:
-
- The accounts receivable will be maintained as a faction of sales which is the average value estimated using the last two years financial statements.
- Inventory will be maintained as a fraction of sales which is the average value estimated using the last two years financial statements.
- Fixed assets will be maintained as a fraction of sales which is the average value estimated using the last two years financial statements.
- Depreciation is 10% of the average fixed assets at costs.
- Accounts payable and accrued expenses, and other current liabilities will be maintained as respective fractions of sales which are the average value estimated using the last two years financial statements.
- Long-term debt is a fraction of sales which is the average value estimated using the last two years financial statements.
- There will not be any new equity raised.
- Sales are expected to grow at 30% for the next three years, 15% for the following 2 years, and thereafter it will stabilized at 5%.
- Other income is expected to grow at 3%.
- Cost of goods sold, and selling general and administrative expense are respective fraction of sales which are the average value estimated using the last two years financial statements.
- The interest expense is approximate as 9% of the long-term debt which the interest income is 5% of the cash and cash equivalents.
- Income tax rate will be 40%
- Dividend payout ratio will be 15%.
- The number of shares outstanding will be 2,000,000
- The average asset for firms in XYZ’s industry is 1.20 and the average WACC is 15.52%
- Estimate the following
- Free Cash Flow
- Enterprise value
- Equity value
- Equity price per share
ANSWER
- A
A | Total Interest | $174,827.14 | |||
Loan Amount | $250,000.00 | Principle Outstanding | |||
Rate of interest | 7.50% | 5th Year | $194,403.19 | ||
Term (years) | 15 | 10th Year | $114,586.78 | ||
15th Year | $0.00 | ||||
Present Value annuity factor | 8.83 | ||||
Instalment (annual) | $28,321.81 | ||||
Years | Opening | Installment | Interest | Payment towards Principle | Closing |
1 | 250,000 | 28321.81 | 18,750.0 | 9,571.8 | 240,428.19 |
2 | 240,428.19 | 28321.81 | 18,032.1 | 10,289.7 | 230,138.50 |
3 | 230,138.50 | 28321.81 | 17,260.4 | 11,061.4 | 219,077.07 |
4 | 219,077.07 | 28321.81 | 16,430.8 | 11,891.0 | 207,186.05 |
5 | 207,186.05 | 28321.81 | 15,539.0 | 12,782.9 | 194,403.19 |
6 | 194,403.19 | 28321.81 | 14,580.2 | 13,741.6 | 180,661.62 |
7 | 180,661.62 | 28321.81 | 13,549.6 | 14,772.2 | 165,889.43 |
8 | 165,889.43 | 28321.81 | 12,441.7 | 15,880.1 | 150,009.33 |
9 | 150,009.33 | 28321.81 | 11,250.7 | 17,071.1 | 132,938.22 |
10 | 132,938.22 | 28321.81 | 9,970.4 | 18,351.4 | 114,586.78 |
11 | 114,586.78 | 28321.81 | 8,594.0 | 19,727.8 | 94,858.98 |
12 | 94,858.98 | 28321.81 | 7,114.4 | 21,207.4 | 73,651.59 |
13 | 73,651.59 | 28321.81 | 5,523.9 | 22,797.9 | 50,853.65 |
14 | 50,853.65 | 28321.81 | 3,814.0 | 24,507.8 | 26,345.87 |
15 | 26,345.87 | 28321.81 | 1,975.9 | 26,345.9 | – |
Total Interest | 174,827.1 |
1.B
B | Total Interest | $167,155.56 | |||
Loan Amount | $250,000.00 | Principle Outstanding | |||
Rate of interest Per Month | 0.63% | 5th Year | $195,239.79 | ||
Term Months | 180 | 10th Year | $115,657.09 | ||
15th Year | $0.00 | ||||
Present Value annuity factor | 107.87 | ||||
Instalment Monthly | $2,317.53 | ||||
Months | Opening | Installment | Interest | Payment towards Principle | Closing |
1 | 250,000 | 2317.53090000683 | 1,562.50 | 755.03 | 249,244.97 |
2 | 249,244.97 | 2317.53090000683 | 1,557.78 | 759.75 | 248,485.22 |
3 | 248,485.22 | 2317.53090000683 | 1,553.03 | 764.50 | 247,720.72 |
4 | 247,720.72 | 2317.53090000683 | 1,548.25 | 769.28 | 246,951.44 |
5 | 246,951.44 | 2317.53090000683 | 1,543.45 | 774.08 | 246,177.36 |
6 | 246,177.36 | 2317.53090000683 | 1,538.61 | 778.92 | 245,398.44 |
7 | 245,398.44 | 2317.53090000683 | 1,533.74 | 783.79 | 244,614.65 |
8 | 244,614.65 | 2317.53090000683 | 1,528.84 | 788.69 | 243,825.96 |
9 | 243,825.96 | 2317.53090000683 | 1,523.91 | 793.62 | 243,032.34 |
10 | 243,032.34 | 2317.53090000683 | 1,518.95 | 798.58 | 242,233.76 |
11 | 242,233.76 | 2317.53090000683 | 1,513.96 | 803.57 | 241,430.19 |
12 | 241,430.19 | 2317.53090000683 | 1,508.94 | 808.59 | 240,621.60 |
13 | 240,621.60 | 2317.53090000683 | 1,503.88 | 813.65 | 239,807.95 |
14 | 239,807.95 | 2317.53090000683 | 1,498.80 | 818.73 | 238,989.22 |
15 | 238,989.22 | 2317.53090000683 | 1,493.68 | 823.85 | 238,165.37 |
16 | 238,165.37 | 2317.53090000683 | 1,488.53 | 829.00 | 237,336.38 |
17 | 237,336.38 | 2317.53090000683 | 1,483.35 | 834.18 | 236,502.20 |
18 | 236,502.20 | 2317.53090000683 | 1,478.14 | 839.39 | 235,662.80 |
19 | 235,662.80 | 2317.53090000683 | 1,472.89 | 844.64 | 234,818.17 |
20 | 234,818.17 | 2317.53090000683 | 1,467.61 | 849.92 | 233,968.25 |
21 | 233,968.25 | 2317.53090000683 | 1,462.30 | 855.23 | 233,113.02 |
22 | 233,113.02 | 2317.53090000683 | 1,456.96 | 860.57 | 232,252.45 |
23 | 232,252.45 | 2317.53090000683 | 1,451.58 | 865.95 | 231,386.49 |
24 | 231,386.49 | 2317.53090000683 | 1,446.17 | 871.37 | 230,515.13 |
25 | 230,515.13 | 2317.53090000683 | 1,440.72 | 876.81 | 229,638.32 |
26 | 229,638.32 | 2317.53090000683 | 1,435.24 | 882.29 | 228,756.02 |
27 | 228,756.02 | 2317.53090000683 | 1,429.73 | 887.81 | 227,868.22 |
28 | 227,868.22 | 2317.53090000683 | 1,424.18 | 893.35 | 226,974.86 |
29 | 226,974.86 | 2317.53090000683 | 1,418.59 | 898.94 | 226,075.93 |
30 | 226,075.93 | 2317.53090000683 | 1,412.97 | 904.56 | 225,171.37 |
31 | 225,171.37 | 2317.53090000683 | 1,407.32 | 910.21 | 224,261.16 |
32 | 224,261.16 | 2317.53090000683 | 1,401.63 | 915.90 | 223,345.26 |
33 | 223,345.26 | 2317.53090000683 | 1,395.91 | 921.62 | 222,423.64 |
34 | 222,423.64 | 2317.53090000683 | 1,390.15 | 927.38 | 221,496.25 |
35 | 221,496.25 | 2317.53090000683 | 1,384.35 | 933.18 | 220,563.08 |
36 | 220,563.08 | 2317.53090000683 | 1,378.52 | 939.01 | 219,624.06 |
37 | 219,624.06 | 2317.53090000683 | 1,372.65 | 944.88 | 218,679.18 |
38 | 218,679.18 | 2317.53090000683 | 1,366.74 | 950.79 | 217,728.40 |
39 | 217,728.40 | 2317.53090000683 | 1,360.80 | 956.73 | 216,771.67 |
40 | 216,771.67 | 2317.53090000683 | 1,354.82 | 962.71 | 215,808.96 |
41 | 215,808.96 | 2317.53090000683 | 1,348.81 | 968.72 | 214,840.24 |
42 | 214,840.24 | 2317.53090000683 | 1,342.75 | 974.78 | 213,865.46 |
43 | 213,865.46 | 2317.53090000683 | 1,336.66 | 980.87 | 212,884.58 |
44 | 212,884.58 | 2317.53090000683 | 1,330.53 | 987.00 | 211,897.58 |
45 | 211,897.58 | 2317.53090000683 | 1,324.36 | 993.17 | 210,904.41 |
46 | 210,904.41 | 2317.53090000683 | 1,318.15 | 999.38 | 209,905.03 |
47 | 209,905.03 | 2317.53090000683 | 1,311.91 | 1,005.62 | 208,899.41 |
48 | 208,899.41 | 2317.53090000683 | 1,305.62 | 1,011.91 | 207,887.50 |
49 | 207,887.50 | 2317.53090000683 | 1,299.30 | 1,018.23 | 206,869.27 |
50 | 206,869.27 | 2317.53090000683 | 1,292.93 | 1,024.60 | 205,844.67 |
51 | 205,844.67 | 2317.53090000683 | 1,286.53 | 1,031.00 | 204,813.67 |
52 | 204,813.67 | 2317.53090000683 | 1,280.09 | 1,037.45 | 203,776.22 |
53 | 203,776.22 | 2317.53090000683 | 1,273.60 | 1,043.93 | 202,732.29 |
54 | 202,732.29 | 2317.53090000683 | 1,267.08 | 1,050.45 | 201,681.84 |
55 | 201,681.84 | 2317.53090000683 | 1,260.51 | 1,057.02 | 200,624.82 |
56 | 200,624.82 | 2317.53090000683 | 1,253.91 | 1,063.63 | 199,561.19 |
57 | 199,561.19 | 2317.53090000683 | 1,247.26 | 1,070.27 | 198,490.92 |
58 | 198,490.92 | 2317.53090000683 | 1,240.57 | 1,076.96 | 197,413.95 |
59 | 197,413.95 | 2317.53090000683 | 1,233.84 | 1,083.69 | 196,330.26 |
60 | 196,330.26 | 2317.53090000683 | 1,227.06 | 1,090.47 | 195,239.79 |
61 | 195,239.79 | 2317.53090000683 | 1,220.25 | 1,097.28 | 194,142.51 |
62 | 194,142.51 | 2317.53090000683 | 1,213.39 | 1,104.14 | 193,038.37 |
63 | 193,038.37 | 2317.53090000683 | 1,206.49 | 1,111.04 | 191,927.33 |
64 | 191,927.33 | 2317.53090000683 | 1,199.55 | 1,117.99 | 190,809.35 |
65 | 190,809.35 | 2317.53090000683 | 1,192.56 | 1,124.97 | 189,684.37 |
66 | 189,684.37 | 2317.53090000683 | 1,185.53 | 1,132.00 | 188,552.37 |
67 | 188,552.37 | 2317.53090000683 | 1,178.45 | 1,139.08 | 187,413.29 |
68 | 187,413.29 | 2317.53090000683 | 1,171.33 | 1,146.20 | 186,267.09 |
69 | 186,267.09 | 2317.53090000683 | 1,164.17 | 1,153.36 | 185,113.73 |
70 | 185,113.73 | 2317.53090000683 | 1,156.96 | 1,160.57 | 183,953.16 |
71 | 183,953.16 | 2317.53090000683 | 1,149.71 | 1,167.82 | 182,785.34 |
72 | 182,785.34 | 2317.53090000683 | 1,142.41 | 1,175.12 | 181,610.22 |
73 | 181,610.22 | 2317.53090000683 | 1,135.06 | 1,182.47 | 180,427.75 |
74 | 180,427.75 | 2317.53090000683 | 1,127.67 | 1,189.86 | 179,237.89 |
75 | 179,237.89 | 2317.53090000683 | 1,120.24 | 1,197.29 | 178,040.60 |
76 | 178,040.60 | 2317.53090000683 | 1,112.75 | 1,204.78 | 176,835.82 |
77 | 176,835.82 | 2317.53090000683 | 1,105.22 | 1,212.31 | 175,623.51 |
78 | 175,623.51 | 2317.53090000683 | 1,097.65 | 1,219.88 | 174,403.63 |
79 | 174,403.63 | 2317.53090000683 | 1,090.02 | 1,227.51 | 173,176.12 |
80 | 173,176.12 | 2317.53090000683 | 1,082.35 | 1,235.18 | 171,940.94 |
81 | 171,940.94 | 2317.53090000683 | 1,074.63 | 1,242.90 | 170,698.04 |
82 | 170,698.04 | 2317.53090000683 | 1,066.86 | 1,250.67 | 169,447.37 |
83 | 169,447.37 | 2317.53090000683 | 1,059.05 | 1,258.48 | 168,188.89 |
84 | 168,188.89 | 2317.53090000683 | 1,051.18 | 1,266.35 | 166,922.54 |
85 | 166,922.54 | 2317.53090000683 | 1,043.27 | 1,274.27 | 165,648.27 |
86 | 165,648.27 | 2317.53090000683 | 1,035.30 | 1,282.23 | 164,366.04 |
87 | 164,366.04 | 2317.53090000683 | 1,027.29 | 1,290.24 | 163,075.80 |
88 | 163,075.80 | 2317.53090000683 | 1,019.22 | 1,298.31 | 161,777.49 |
89 | 161,777.49 | 2317.53090000683 | 1,011.11 | 1,306.42 | 160,471.07 |
90 | 160,471.07 | 2317.53090000683 | 1,002.94 | 1,314.59 | 159,156.48 |
91 | 159,156.48 | 2317.53090000683 | 994.73 | 1,322.80 | 157,833.68 |
92 | 157,833.68 | 2317.53090000683 | 986.46 | 1,331.07 | 156,502.61 |
93 | 156,502.61 | 2317.53090000683 | 978.14 | 1,339.39 | 155,163.22 |
94 | 155,163.22 | 2317.53090000683 | 969.77 | 1,347.76 | 153,815.46 |
95 | 153,815.46 | 2317.53090000683 | 961.35 | 1,356.18 | 152,459.28 |
96 | 152,459.28 | 2317.53090000683 | 952.87 | 1,364.66 | 151,094.62 |
97 | 151,094.62 | 2317.53090000683 | 944.34 | 1,373.19 | 149,721.43 |
98 | 149,721.43 | 2317.53090000683 | 935.76 | 1,381.77 | 148,339.65 |
99 | 148,339.65 | 2317.53090000683 | 927.12 | 1,390.41 | 146,949.25 |
100 | 146,949.25 | 2317.53090000683 | 918.43 | 1,399.10 | 145,550.15 |
101 | 145,550.15 | 2317.53090000683 | 909.69 | 1,407.84 | 144,142.31 |
102 | 144,142.31 | 2317.53090000683 | 900.89 | 1,416.64 | 142,725.66 |
103 | 142,725.66 | 2317.53090000683 | 892.04 | 1,425.50 | 141,300.17 |
104 | 141,300.17 | 2317.53090000683 | 883.13 | 1,434.40 | 139,865.76 |
105 | 139,865.76 | 2317.53090000683 | 874.16 | 1,443.37 | 138,422.39 |
106 | 138,422.39 | 2317.53090000683 | 865.14 | 1,452.39 | 136,970.00 |
107 | 136,970.00 | 2317.53090000683 | 856.06 | 1,461.47 | 135,508.53 |
108 | 135,508.53 | 2317.53090000683 | 846.93 | 1,470.60 | 134,037.93 |
109 | 134,037.93 | 2317.53090000683 | 837.74 | 1,479.79 | 132,558.14 |
110 | 132,558.14 | 2317.53090000683 | 828.49 | 1,489.04 | 131,069.10 |
111 | 131,069.10 | 2317.53090000683 | 819.18 | 1,498.35 | 129,570.75 |
112 | 129,570.75 | 2317.53090000683 | 809.82 | 1,507.71 | 128,063.03 |
113 | 128,063.03 | 2317.53090000683 | 800.39 | 1,517.14 | 126,545.90 |
114 | 126,545.90 | 2317.53090000683 | 790.91 | 1,526.62 | 125,019.28 |
115 | 125,019.28 | 2317.53090000683 | 781.37 | 1,536.16 | 123,483.12 |
116 | 123,483.12 | 2317.53090000683 | 771.77 | 1,545.76 | 121,937.36 |
117 | 121,937.36 | 2317.53090000683 | 762.11 | 1,555.42 | 120,381.93 |
118 | 120,381.93 | 2317.53090000683 | 752.39 | 1,565.14 | 118,816.79 |
119 | 118,816.79 | 2317.53090000683 | 742.60 | 1,574.93 | 117,241.86 |
120 | 117,241.86 | 2317.53090000683 | 732.76 | 1,584.77 | 115,657.09 |
121 | 115,657.09 | 2317.53090000683 | 722.86 | 1,594.67 | 114,062.42 |
122 | 114,062.42 | 2317.53090000683 | 712.89 | 1,604.64 | 112,457.78 |
123 | 112,457.78 | 2317.53090000683 | 702.86 | 1,614.67 | 110,843.11 |
124 | 110,843.11 | 2317.53090000683 | 692.77 | 1,624.76 | 109,218.35 |
125 | 109,218.35 | 2317.53090000683 | 682.61 | 1,634.92 | 107,583.43 |
126 | 107,583.43 | 2317.53090000683 | 672.40 | 1,645.13 | 105,938.30 |
127 | 105,938.30 | 2317.53090000683 | 662.11 | 1,655.42 | 104,282.88 |
128 | 104,282.88 | 2317.53090000683 | 651.77 | 1,665.76 | 102,617.12 |
129 | 102,617.12 | 2317.53090000683 | 641.36 | 1,676.17 | 100,940.94 |
130 | 100,940.94 | 2317.53090000683 | 630.88 | 1,686.65 | 99,254.29 |
131 | 99,254.29 | 2317.53090000683 | 620.34 | 1,697.19 | 97,557.10 |
132 | 97,557.10 | 2317.53090000683 | 609.73 | 1,707.80 | 95,849.30 |
133 | 95,849.30 | 2317.53090000683 | 599.06 | 1,718.47 | 94,130.83 |
134 | 94,130.83 | 2317.53090000683 | 588.32 | 1,729.21 | 92,401.62 |
135 | 92,401.62 | 2317.53090000683 | 577.51 | 1,740.02 | 90,661.60 |
136 | 90,661.60 | 2317.53090000683 | 566.63 | 1,750.90 | 88,910.70 |
137 | 88,910.70 | 2317.53090000683 | 555.69 | 1,761.84 | 87,148.86 |
138 | 87,148.86 | 2317.53090000683 | 544.68 | 1,772.85 | 85,376.01 |
139 | 85,376.01 | 2317.53090000683 | 533.60 | 1,783.93 | 83,592.08 |
140 | 83,592.08 | 2317.53090000683 | 522.45 | 1,795.08 | 81,797.00 |
141 | 81,797.00 | 2317.53090000683 | 511.23 | 1,806.30 | 79,990.70 |
142 | 79,990.70 | 2317.53090000683 | 499.94 | 1,817.59 | 78,173.11 |
143 | 78,173.11 | 2317.53090000683 | 488.58 | 1,828.95 | 76,344.16 |
144 | 76,344.16 | 2317.53090000683 | 477.15 | 1,840.38 | 74,503.78 |
145 | 74,503.78 | 2317.53090000683 | 465.65 | 1,851.88 | 72,651.90 |
146 | 72,651.90 | 2317.53090000683 | 454.07 | 1,863.46 | 70,788.44 |
147 | 70,788.44 | 2317.53090000683 | 442.43 | 1,875.10 | 68,913.34 |
148 | 68,913.34 | 2317.53090000683 | 430.71 | 1,886.82 | 67,026.52 |
149 | 67,026.52 | 2317.53090000683 | 418.92 | 1,898.62 | 65,127.90 |
150 | 65,127.90 | 2317.53090000683 | 407.05 | 1,910.48 | 63,217.42 |
151 | 63,217.42 | 2317.53090000683 | 395.11 | 1,922.42 | 61,295.00 |
152 | 61,295.00 | 2317.53090000683 | 383.09 | 1,934.44 | 59,360.56 |
153 | 59,360.56 | 2317.53090000683 | 371.00 | 1,946.53 | 57,414.03 |
154 | 57,414.03 | 2317.53090000683 | 358.84 | 1,958.69 | 55,455.34 |
155 | 55,455.34 | 2317.53090000683 | 346.60 | 1,970.94 | 53,484.41 |
156 | 53,484.41 | 2317.53090000683 | 334.28 | 1,983.25 | 51,501.15 |
157 | 51,501.15 | 2317.53090000683 | 321.88 | 1,995.65 | 49,505.50 |
158 | 49,505.50 | 2317.53090000683 | 309.41 | 2,008.12 | 47,497.38 |
159 | 47,497.38 | 2317.53090000683 | 296.86 | 2,020.67 | 45,476.71 |
160 | 45,476.71 | 2317.53090000683 | 284.23 | 2,033.30 | 43,443.41 |
161 | 43,443.41 | 2317.53090000683 | 271.52 | 2,046.01 | 41,397.40 |
162 | 41,397.40 | 2317.53090000683 | 258.73 | 2,058.80 | 39,338.60 |
163 | 39,338.60 | 2317.53090000683 | 245.87 | 2,071.66 | 37,266.94 |
164 | 37,266.94 | 2317.53090000683 | 232.92 | 2,084.61 | 35,182.33 |
165 | 35,182.33 | 2317.53090000683 | 219.89 | 2,097.64 | 33,084.68 |
166 | 33,084.68 | 2317.53090000683 | 206.78 | 2,110.75 | 30,973.93 |
167 | 30,973.93 | 2317.53090000683 | 193.59 | 2,123.94 | 28,849.99 |
168 | 28,849.99 | 2317.53090000683 | 180.31 | 2,137.22 | 26,712.77 |
169 | 26,712.77 | 2317.53090000683 | 166.95 | 2,150.58 | 24,562.19 |
170 | 24,562.19 | 2317.53090000683 | 153.51 | 2,164.02 | 22,398.18 |
171 | 22,398.18 | 2317.53090000683 | 139.99 | 2,177.54 | 20,220.63 |
172 | 20,220.63 | 2317.53090000683 | 126.38 | 2,191.15 | 18,029.48 |
173 | 18,029.48 | 2317.53090000683 | 112.68 | 2,204.85 | 15,824.64 |
174 | 15,824.64 | 2317.53090000683 | 98.90 | 2,218.63 | 13,606.01 |
175 | 13,606.01 | 2317.53090000683 | 85.04 | 2,232.49 | 11,373.52 |
176 | 11,373.52 | 2317.53090000683 | 71.08 | 2,246.45 | 9,127.07 |
177 | 9,127.07 | 2317.53090000683 | 57.04 | 2,260.49 | 6,866.58 |
178 | 6,866.58 | 2317.53090000683 | 42.92 | 2,274.61 | 4,591.97 |
179 | 4,591.97 | 2317.53090000683 | 28.70 | 2,288.83 | 2,303.14 |
180 | 2,303.14 | 2317.53090000683 | 14.39 | 2,303.14 | 0.00 |
Total Interest | 167,155.56 |
1.C
C | Total Interest | $144,997.66 | |||
Loan Amount | $250,000.00 | Term of loan months | 157.20 | ||
Rate of interest Per Month | 0.63% | Term of loan in years | 13.10 | ||
Term Months | 180 | Principle Outstanding | |||
5th Year | $185,181.95 | ||||
Present Value annuity factor | 107.87 | 10th Year | $82,908.31 | ||
Instalment Monthly | $2,317.53 | ||||
Months | Opening | Installment | Interest | Payment towards Principle | Closing |
1 | 250,000 | 2317.53090000683 | 1,562.50 | 755.03 | 249,244.97 |
2 | 249,244.97 | 2317.53090000683 | 1,557.78 | 759.75 | 248,485.22 |
3 | 248,485.22 | 2317.53090000683 | 1,553.03 | 764.50 | 247,720.72 |
4 | 247,720.72 | 2317.53090000683 | 1,548.25 | 769.28 | 246,951.44 |
5 | 246,951.44 | 2317.53090000683 | 1,543.45 | 774.08 | 246,177.36 |
6 | 246,177.36 | 2317.53090000683 | 1,538.61 | 778.92 | 245,398.44 |
7 | 245,398.44 | 2317.53090000683 | 1,533.74 | 783.79 | 244,614.65 |
8 | 244,614.65 | 2317.53090000683 | 1,528.84 | 788.69 | 243,825.96 |
9 | 243,825.96 | 2317.53090000683 | 1,523.91 | 793.62 | 243,032.34 |
10 | 243,032.34 | 2317.53090000683 | 1,518.95 | 798.58 | 242,233.76 |
11 | 242,233.76 | 2317.53090000683 | 1,513.96 | 803.57 | 241,430.19 |
12 | 241,430.19 | 2317.53090000683 | 1,508.94 | 808.59 | 240,621.60 |
13 | 240,621.60 | 2317.53090000683 | 1,503.88 | 813.65 | 239,807.95 |
14 | 239,807.95 | 2317.53090000683 | 1,498.80 | 818.73 | 238,989.22 |
15 | 238,989.22 | 2317.53090000683 | 1,493.68 | 823.85 | 238,165.37 |
16 | 238,165.37 | 2317.53090000683 | 1,488.53 | 829.00 | 237,336.38 |
17 | 237,336.38 | 2317.53090000683 | 1,483.35 | 834.18 | 236,502.20 |
18 | 236,502.20 | 2317.53090000683 | 1,478.14 | 839.39 | 235,662.80 |
19 | 235,662.80 | 2317.53090000683 | 1,472.89 | 844.64 | 234,818.17 |
20 | 234,818.17 | 2317.53090000683 | 1,467.61 | 849.92 | 233,968.25 |
21 | 233,968.25 | 2317.53090000683 | 1,462.30 | 855.23 | 233,113.02 |
22 | 233,113.02 | 2317.53090000683 | 1,456.96 | 860.57 | 232,252.45 |
23 | 232,252.45 | 2317.53090000683 | 1,451.58 | 865.95 | 231,386.49 |
24 | 231,386.49 | 2317.53090000683 | 1,446.17 | 871.37 | 230,515.13 |
25 | 230,515.13 | 2567.53090000683 | 1,440.72 | 1,126.81 | 229,388.32 |
26 | 229,388.32 | 2567.53090000683 | 1,433.68 | 1,133.85 | 228,254.46 |
27 | 228,254.46 | 2567.53090000683 | 1,426.59 | 1,140.94 | 227,113.52 |
28 | 227,113.52 | 2567.53090000683 | 1,419.46 | 1,148.07 | 225,965.45 |
29 | 225,965.45 | 2567.53090000683 | 1,412.28 | 1,155.25 | 224,810.20 |
30 | 224,810.20 | 2567.53090000683 | 1,405.06 | 1,162.47 | 223,647.74 |
31 | 223,647.74 | 2567.53090000683 | 1,397.80 | 1,169.73 | 222,478.00 |
32 | 222,478.00 | 2567.53090000683 | 1,390.49 | 1,177.04 | 221,300.96 |
33 | 221,300.96 | 2567.53090000683 | 1,383.13 | 1,184.40 | 220,116.56 |
34 | 220,116.56 | 2567.53090000683 | 1,375.73 | 1,191.80 | 218,924.76 |
35 | 218,924.76 | 2567.53090000683 | 1,368.28 | 1,199.25 | 217,725.51 |
36 | 217,725.51 | 2567.53090000683 | 1,360.78 | 1,206.75 | 216,518.76 |
37 | 216,518.76 | 2567.53090000683 | 1,353.24 | 1,214.29 | 215,304.47 |
38 | 215,304.47 | 2567.53090000683 | 1,345.65 | 1,221.88 | 214,082.59 |
39 | 214,082.59 | 2567.53090000683 | 1,338.02 | 1,229.51 | 212,853.08 |
40 | 212,853.08 | 2567.53090000683 | 1,330.33 | 1,237.20 | 211,615.88 |
41 | 211,615.88 | 2567.53090000683 | 1,322.60 | 1,244.93 | 210,370.95 |
42 | 210,370.95 | 2567.53090000683 | 1,314.82 | 1,252.71 | 209,118.24 |
43 | 209,118.24 | 2567.53090000683 | 1,306.99 | 1,260.54 | 207,857.69 |
44 | 207,857.69 | 2567.53090000683 | 1,299.11 | 1,268.42 | 206,589.27 |
45 | 206,589.27 | 2567.53090000683 | 1,291.18 | 1,276.35 | 205,312.92 |
46 | 205,312.92 | 2567.53090000683 | 1,283.21 | 1,284.33 | 204,028.60 |
47 | 204,028.60 | 2567.53090000683 | 1,275.18 | 1,292.35 | 202,736.25 |
48 | 202,736.25 | 2567.53090000683 | 1,267.10 | 1,300.43 | 201,435.82 |
49 | 201,435.82 | 2567.53090000683 | 1,258.97 | 1,308.56 | 200,127.26 |
50 | 200,127.26 | 2567.53090000683 | 1,250.80 | 1,316.74 | 198,810.53 |
51 | 198,810.53 | 2567.53090000683 | 1,242.57 | 1,324.97 | 197,485.56 |
52 | 197,485.56 | 2567.53090000683 | 1,234.28 | 1,333.25 | 196,152.31 |
53 | 196,152.31 | 2567.53090000683 | 1,225.95 | 1,341.58 | 194,810.74 |
54 | 194,810.74 | 2567.53090000683 | 1,217.57 | 1,349.96 | 193,460.77 |
55 | 193,460.77 | 2567.53090000683 | 1,209.13 | 1,358.40 | 192,102.37 |
56 | 192,102.37 | 2567.53090000683 | 1,200.64 | 1,366.89 | 190,735.48 |
57 | 190,735.48 | 2567.53090000683 | 1,192.10 | 1,375.43 | 189,360.05 |
58 | 189,360.05 | 2567.53090000683 | 1,183.50 | 1,384.03 | 187,976.01 |
59 | 187,976.01 | 2567.53090000683 | 1,174.85 | 1,392.68 | 186,583.33 |
60 | 186,583.33 | 2567.53090000683 | 1,166.15 | 1,401.39 | 185,181.95 |
61 | 185,181.95 | 2567.53090000683 | 1,157.39 | 1,410.14 | 183,771.81 |
62 | 183,771.81 | 2567.53090000683 | 1,148.57 | 1,418.96 | 182,352.85 |
63 | 182,352.85 | 2567.53090000683 | 1,139.71 | 1,427.83 | 180,925.02 |
64 | 180,925.02 | 2567.53090000683 | 1,130.78 | 1,436.75 | 179,488.27 |
65 | 179,488.27 | 2567.53090000683 | 1,121.80 | 1,445.73 | 178,042.54 |
66 | 178,042.54 | 2567.53090000683 | 1,112.77 | 1,454.77 | 176,587.78 |
67 | 176,587.78 | 2567.53090000683 | 1,103.67 | 1,463.86 | 175,123.92 |
68 | 175,123.92 | 2567.53090000683 | 1,094.52 | 1,473.01 | 173,650.92 |
69 | 173,650.92 | 2567.53090000683 | 1,085.32 | 1,482.21 | 172,168.70 |
70 | 172,168.70 | 2567.53090000683 | 1,076.05 | 1,491.48 | 170,677.23 |
71 | 170,677.23 | 2567.53090000683 | 1,066.73 | 1,500.80 | 169,176.43 |
72 | 169,176.43 | 2567.53090000683 | 1,057.35 | 1,510.18 | 167,666.25 |
73 | 167,666.25 | 2567.53090000683 | 1,047.91 | 1,519.62 | 166,146.63 |
74 | 166,146.63 | 2567.53090000683 | 1,038.42 | 1,529.11 | 164,617.52 |
75 | 164,617.52 | 2567.53090000683 | 1,028.86 | 1,538.67 | 163,078.85 |
76 | 163,078.85 | 2567.53090000683 | 1,019.24 | 1,548.29 | 161,530.56 |
77 | 161,530.56 | 2567.53090000683 | 1,009.57 | 1,557.96 | 159,972.59 |
78 | 159,972.59 | 2567.53090000683 | 999.83 | 1,567.70 | 158,404.89 |
79 | 158,404.89 | 2567.53090000683 | 990.03 | 1,577.50 | 156,827.39 |
80 | 156,827.39 | 2567.53090000683 | 980.17 | 1,587.36 | 155,240.03 |
81 | 155,240.03 | 2567.53090000683 | 970.25 | 1,597.28 | 153,642.75 |
82 | 153,642.75 | 2567.53090000683 | 960.27 | 1,607.26 | 152,035.49 |
83 | 152,035.49 | 2567.53090000683 | 950.22 | 1,617.31 | 150,418.18 |
84 | 150,418.18 | 2567.53090000683 | 940.11 | 1,627.42 | 148,790.76 |
85 | 148,790.76 | 2567.53090000683 | 929.94 | 1,637.59 | 147,153.17 |
86 | 147,153.17 | 2567.53090000683 | 919.71 | 1,647.82 | 145,505.35 |
87 | 145,505.35 | 2567.53090000683 | 909.41 | 1,658.12 | 143,847.23 |
88 | 143,847.23 | 2567.53090000683 | 899.05 | 1,668.49 | 142,178.74 |
89 | 142,178.74 | 2567.53090000683 | 888.62 | 1,678.91 | 140,499.83 |
90 | 140,499.83 | 2567.53090000683 | 878.12 | 1,689.41 | 138,810.42 |
91 | 138,810.42 | 2567.53090000683 | 867.57 | 1,699.97 | 137,110.45 |
92 | 137,110.45 | 2567.53090000683 | 856.94 | 1,710.59 | 135,399.86 |
93 | 135,399.86 | 2567.53090000683 | 846.25 | 1,721.28 | 133,678.58 |
94 | 133,678.58 | 2567.53090000683 | 835.49 | 1,732.04 | 131,946.54 |
95 | 131,946.54 | 2567.53090000683 | 824.67 | 1,742.87 | 130,203.68 |
96 | 130,203.68 | 2567.53090000683 | 813.77 | 1,753.76 | 128,449.92 |
97 | 128,449.92 | 2567.53090000683 | 802.81 | 1,764.72 | 126,685.20 |
98 | 126,685.20 | 2567.53090000683 | 791.78 | 1,775.75 | 124,909.45 |
99 | 124,909.45 | 2567.53090000683 | 780.68 | 1,786.85 | 123,122.60 |
100 | 123,122.60 | 2567.53090000683 | 769.52 | 1,798.01 | 121,324.59 |
101 | 121,324.59 | 2567.53090000683 | 758.28 | 1,809.25 | 119,515.34 |
102 | 119,515.34 | 2567.53090000683 | 746.97 | 1,820.56 | 117,694.78 |
103 | 117,694.78 | 2567.53090000683 | 735.59 | 1,831.94 | 115,862.84 |
104 | 115,862.84 | 2567.53090000683 | 724.14 | 1,843.39 | 114,019.45 |
105 | 114,019.45 | 2567.53090000683 | 712.62 | 1,854.91 | 112,164.54 |
106 | 112,164.54 | 2567.53090000683 | 701.03 | 1,866.50 | 110,298.04 |
107 | 110,298.04 | 2567.53090000683 | 689.36 | 1,878.17 | 108,419.87 |
108 | 108,419.87 | 2567.53090000683 | 677.62 | 1,889.91 | 106,529.96 |
109 | 106,529.96 | 2567.53090000683 | 665.81 | 1,901.72 | 104,628.25 |
110 | 104,628.25 | 2567.53090000683 | 653.93 | 1,913.60 | 102,714.64 |
111 | 102,714.64 | 2567.53090000683 | 641.97 | 1,925.56 | 100,789.08 |
112 | 100,789.08 | 2567.53090000683 | 629.93 | 1,937.60 | 98,851.48 |
113 | 98,851.48 | 2567.53090000683 | 617.82 | 1,949.71 | 96,901.77 |
114 | 96,901.77 | 2567.53090000683 | 605.64 | 1,961.89 | 94,939.87 |
115 | 94,939.87 | 2567.53090000683 | 593.37 | 1,974.16 | 92,965.72 |
116 | 92,965.72 | 2567.53090000683 | 581.04 | 1,986.50 | 90,979.22 |
117 | 90,979.22 | 2567.53090000683 | 568.62 | 1,998.91 | 88,980.31 |
118 | 88,980.31 | 2567.53090000683 | 556.13 | 2,011.40 | 86,968.91 |
119 | 86,968.91 | 2567.53090000683 | 543.56 | 2,023.98 | 84,944.93 |
120 | 84,944.93 | 2567.53090000683 | 530.91 | 2,036.63 | 82,908.31 |
121 | 82,908.31 | 2567.53090000683 | 518.18 | 2,049.35 | 80,858.95 |
122 | 80,858.95 | 2567.53090000683 | 505.37 | 2,062.16 | 78,796.79 |
123 | 78,796.79 | 2567.53090000683 | 492.48 | 2,075.05 | 76,721.74 |
124 | 76,721.74 | 2567.53090000683 | 479.51 | 2,088.02 | 74,633.72 |
125 | 74,633.72 | 2567.53090000683 | 466.46 | 2,101.07 | 72,532.65 |
126 | 72,532.65 | 2567.53090000683 | 453.33 | 2,114.20 | 70,418.45 |
127 | 70,418.45 | 2567.53090000683 | 440.12 | 2,127.42 | 68,291.03 |
128 | 68,291.03 | 2567.53090000683 | 426.82 | 2,140.71 | 66,150.32 |
129 | 66,150.32 | 2567.53090000683 | 413.44 | 2,154.09 | 63,996.23 |
130 | 63,996.23 | 2567.53090000683 | 399.98 | 2,167.55 | 61,828.67 |
131 | 61,828.67 | 2567.53090000683 | 386.43 | 2,181.10 | 59,647.57 |
132 | 59,647.57 | 2567.53090000683 | 372.80 | 2,194.73 | 57,452.84 |
133 | 57,452.84 | 2567.53090000683 | 359.08 | 2,208.45 | 55,244.39 |
134 | 55,244.39 | 2567.53090000683 | 345.28 | 2,222.25 | 53,022.13 |
135 | 53,022.13 | 2567.53090000683 | 331.39 | 2,236.14 | 50,785.99 |
136 | 50,785.99 | 2567.53090000683 | 317.41 | 2,250.12 | 48,535.87 |
137 | 48,535.87 | 2567.53090000683 | 303.35 | 2,264.18 | 46,271.69 |
138 | 46,271.69 | 2567.53090000683 | 289.20 | 2,278.33 | 43,993.36 |
139 | 43,993.36 | 2567.53090000683 | 274.96 | 2,292.57 | 41,700.79 |
140 | 41,700.79 | 2567.53090000683 | 260.63 | 2,306.90 | 39,393.89 |
141 | 39,393.89 | 2567.53090000683 | 246.21 | 2,321.32 | 37,072.57 |
142 | 37,072.57 | 2567.53090000683 | 231.70 | 2,335.83 | 34,736.74 |
143 | 34,736.74 | 2567.53090000683 | 217.10 | 2,350.43 | 32,386.31 |
144 | 32,386.31 | 2567.53090000683 | 202.41 | 2,365.12 | 30,021.20 |
145 | 30,021.20 | 2567.53090000683 | 187.63 | 2,379.90 | 27,641.30 |
146 | 27,641.30 | 2567.53090000683 | 172.76 | 2,394.77 | 25,246.53 |
147 | 25,246.53 | 2567.53090000683 | 157.79 | 2,409.74 | 22,836.79 |
148 | 22,836.79 | 2567.53090000683 | 142.73 | 2,424.80 | 20,411.98 |
149 | 20,411.98 | 2567.53090000683 | 127.57 | 2,439.96 | 17,972.03 |
150 | 17,972.03 | 2567.53090000683 | 112.33 | 2,455.21 | 15,516.82 |
151 | 15,516.82 | 2567.53090000683 | 96.98 | 2,470.55 | 13,046.27 |
152 | 13,046.27 | 2567.53090000683 | 81.54 | 2,485.99 | 10,560.28 |
153 | 10,560.28 | 2567.53090000683 | 66.00 | 2,501.53 | 8,058.75 |
154 | 8,058.75 | 2567.53090000683 | 50.37 | 2,517.16 | 5,541.59 |
155 | 5,541.59 | 2567.53090000683 | 34.63 | 2,532.90 | 3,008.69 |
156 | 3,008.69 | 2567.53090000683 | 18.80 | 2,548.73 | 459.96 |
157 | 459.96 | 462.83 | 2.87 | 459.96 | 0.00 |
Total Interest | 144,997.66 |
1.D
Particulars | A | B | C |
Total Interest | $174,827.14 | $167,155.56 | $144,997.66 |
Principle Outstanding | |||
5th Year | $194,403.19 | $195,239.79 | $185,181.95 |
10th Year | $114,586.78 | $115,657.09 | $82,908.31 |
15th Year | 0 | 0 |
1.E
E | |||
The reason behind the different interest amounts in all three scenerio is the frequency of payment of installment. In case instalment is paid once in an year which increases the interest of an year on principle at the time of payment however when installments are paid monthly the interest part is paid off monthly hence don’t get added up principle, hence interest is applied on a lesser amount of principle than in case A. Further in case C with an extra payment the principle part started declining much earlier, as installments started contributing a higher part towards interest much faster than case A and B hence intrest is lowest. |
2.A
Life after Retirement (Years) | 15 |
Amount Required every Year | 60000 |
Time left in retirement (years) | 20 |
Rate of Return for 15 years after retirement | 8% |
Pv factor for 15 years | 8.56 |
Present value of total fund required for 15 years after retirement at the end of 20 years from now | $513,568.72 |
PV factor for 20 years from now | 9.82 |
Amount required to be saved per annum before retirement | $52,308.11 |
2.B
Rate of Return for 15 years after retirement | 4.50% |
Pv factor for 15 years | 10.74 |
Present value of total fund required for 15 years after retirement at the end of 20 years from now | $644,372.74 |
Rate of Return for 20 years before retirement | 9% |
PV factor for 20 years from now | 9.13 |
Amount required to be saved per annum before retirement | $70,588.76 |
2.C
Option A is better as it entails a lesser amount to be saved per annum before retirement. This is because of the higher rate of return after retirement when contribution will be zero and only way to increase the value of money will be rate of return.
3.
Month | Day | Year | Ticker | Ret | Adjdiv | Market | Growth rate | |
12 | 31 | 1986 | GE | 21.83% | 0.0988 | 15.65% | ||
12 | 31 | 1987 | GE | 5.29% | 0.1104 | 1.74% | 12% | |
12 | 30 | 1988 | GE | 4.86% | 0.1217 | 17.61% | 10% | |
12 | 29 | 1989 | GE | 48.71% | 0.1417 | 28.48% | 16% | |
12 | 31 | 1990 | GE | -8.13% | 0.16 | -6.08% | 13% | |
12 | 31 | 1991 | GE | 37.37% | 0.1733 | 33.78% | 8% | |
12 | 31 | 1992 | GE | 15.10% | 0.1933 | 9.06% | 12% | |
12 | 31 | 1993 | GE | 26.04% | 0.2175 | 11.59% | 13% | |
12 | 30 | 1994 | GE | 0.21% | 0.2483 | -0.64% | 14% | |
12 | 29 | 1995 | GE | 45.13% | 0.2817 | 35.73% | 13% | |
12 | 31 | 1996 | GE | 40.28% | 0.3167 | 21.23% | 12% | |
12 | 31 | 1997 | GE | 50.95% | 0.36 | 30.43% | 14% | |
12 | 31 | 1998 | GE | 40.99% | 0.4167 | 22.34% | 16% | |
12 | 31 | 1999 | GE | 53.56% | 0.4867 | 25.68% | 17% | |
12 | 29 | 2000 | GE | -6.00% | 0.57 | -11.25% | 17% | |
12 | 31 | 2001 | GE | -15.07% | 0.66 | -11.07% | 16% | |
12 | 31 | 2002 | GE | -37.71% | 0.73 | -20.88% | 11% | |
12 | 31 | 2003 | GE | 30.75% | 0.77 | 33.15% | 5% | |
12 | 31 | 2004 | GE | 20.68% | 0.82 | 13.02% | 6% | |
12 | 30 | 2005 | GE | -1.43% | 0.91 | 7.31% | 11% | |
12 | 29 | 2006 | GE | 9.35% | 1.03 | 16.24% | 13% |
Answer-A | CAGR of dividend | 12.44% | ||||||||||
Answer-B | Average annual growth rate | 12.48% | ||||||||||
Answer-C | CAGR shall be used in gordon’s model as the model is based on constant growth rates, CAGR is nothing but the mean depiction of flactuating growth rates . | |||||||||||
Answer-D | D2- Dividend | |||||||||||
D2= Dividend X (Growth)^2 | ||||||||||||
1.30 | ||||||||||||
Answer-E | Rate of return | 18.23% | ||||||||||
Expected Dividend of next year | 1.16 | |||||||||||
Price as per gordon’s model at begining of 2008 | $20.00 | |||||||||||
Answer-F | Beta of the stock | 1.32 | ||||||||||
Answer-G | GE is an aggressive stock as the beta is higher than 1, which means any change in market will impact GE’s stock 1.32 times. | |||||||||||
Answer-H | As per CAPM | |||||||||||
Expected rate of return next year | Re= Rf+ (Rm-Rf)Beta | |||||||||||
5.65% |
4.
XYZ Inc. | ||||||||
Balance Sheet for Year 1 and Year 2 | 30% growth in sales | 15% growth in sales | 5% growth | |||||
Year | Y1 | Y2 | Y3 | Y4 | Y5 | Y6 | Y7 | Y8- Perpetual |
Current Assets | ||||||||
Cash and cash equivalence | 164,964 | 467,649 | 665,640 | 960,816 | 1,332,390 | 2,483,940 | 3,826,217 | 5,988,873 |
Accounts receivables | 335,677 | 648,010 | 639,397 | 831,216 | 1,080,580 | 1,242,667 | 1,429,067 | 1,500,521 |
Inventory | 126,477 | 508,220 | 412,553 | 536,319 | 697,215 | 801,797 | 922,066 | 968,170 |
Total current Assets | 627,118 | 1,623,879 | 1,717,590 | 2,328,350 | 3,110,185 | 4,528,404 | 6,177,351 | 8,457,563 |
Property and equipment | ||||||||
At cost | 3,570,000 | 8,756,733 | 8,012,376 | 10,416,089 | 13,540,916 | 15,572,054 | 17,907,862 | 18,803,255 |
Less accumulated depreciation | 357,000 | 973,337 | 801,238 | 1,041,609 | 1,354,092 | 1,557,205 | 1,790,786 | 1,880,325 |
Net property and equipment | 3,213,000 | 7,783,397 | 7,211,139 | 9,374,480 | 12,186,825 | 14,014,848 | 16,117,076 | 16,922,929 |
Total Assets | 3,840,118 | 9,407,276 | 8,928,728 | 11,702,831 | 15,297,009 | 18,543,252 | 22,294,426 | 25,380,493 |
Current Liabilities | ||||||||
Accounts payable and accrued expenses | 475,990 | 1,684,705 | ||||||
Other current liability | 27,778 | 77,862 | ||||||
Total current liabilities | 503,768 | 1,762,567 | 1,473,118 | 1,915,053 | 2,489,569 | 2,863,004 | 3,292,455 | 3,457,078 |
Long term debt | 444,180 | 4,427,905 | 3,166,855 | 4,116,912 | 5,351,985 | 6,154,783 | 7,078,001 | 7,431,901 |
Stockholder’s equity | ||||||||
Common stock | 2,420,774 | 2,420,774 | 2,420,774 | 2,420,774 | 2,420,774 | 2,420,774 | 2,420,774 | 2,420,774 |
Retained Earnings | 471,395 | 796,029 | 1,867,982 | 3,250,092 | 5,034,681 | 7,104,691 | 9,503,196 | 12,070,741 |
Total Equity | 2,892,170 | 3,216,804 | 4,288,756 | 5,670,866 | 7,455,455 | 9,525,465 | 11,923,970 | 14,491,515 |
Total Liabilities and equity | 3,840,118 | 9,407,276 | 8,928,729 | 11,702,831 | 15,297,010 | 18,543,252 | 22,294,426 | 25,380,493 |
XYZ Inc. | ||||||||
Income Statement for Year 1 and Year 2 | ||||||||
Sales | ||||||||
Sales | 3,372,371 | 5,476,925 | 7,120,003 | 9,256,003 | 12,032,804 | 13,837,725 | 15,913,384 | 16,709,053 |
Other Income | 72,886 | 97,742 | 100,674 | 103,694 | 106,805 | 110,009 | 113,310 | 116,709 |
Total Sales | 3,445,257 | 5,574,667 | 7,220,677 | 9,359,698 | 12,139,610 | 13,947,734 | 16,026,693 | 16,825,762 |
Operating expenses | ||||||||
Cost of products sold | 1,366,116 | 2,175,456 | 2,302,022 | 2,992,628 | 3,890,417 | 4,473,979 | 5,145,076 | 5,402,330 |
Depreciation | 357,000 | 616,337 | 801,238 | 1,041,609 | 1,354,092 | 1,557,205 | 1,790,786 | 1,880,325 |
Selling, general, and administrative expenses | 1,035,971 | 1,677,590 | 1,763,815 | 2,292,959 | 2,980,847 | 3,427,974 | 3,942,170 | 4,139,278 |
Interest expense | 39,976 | 398,511 | 285,017 | 370,522 | 481,679 | 553,930 | 637,020 | 668,871 |
Interest income | 8,248 | 18,735 | 33,282 | 48,041 | 66,620 | 124,197 | 191,311 | 299,444 |
Total Expenses | 2,790,815 | 4,849,159 | 5,118,809 | 6,649,678 | 8,640,414 | 9,888,892 | 11,323,741 | 11,791,361 |
Earnings before income taxes | 654,443 | 725,508 | 2,101,868 | 2,710,020 | 3,499,195 | 4,058,842 | 4,702,952 | 5,034,401 |
Income taxes | 268,322 | 290,203 | 840,747 | 1,084,008 | 1,399,678 | 1,623,537 | 1,881,181 | 2,013,760 |
Profit after taxes | 386,121 | 435,304 | 1,261,121 | 1,626,012 | 2,099,517 | 2,435,305 | 2,821,771 | 3,020,640 |
Dividends | 98,166 | 110,671 | 189,168 | 243,902 | 314,928 | 365,296 | 423,266 | 453,096 |
Addition to Retained earnings | 287,955 | 324,634 | 1,071,953 | 1,382,110 | 1,784,590 | 2,070,010 | 2,398,505 | 2,567,544 |
FCFF | 197,991 | 295,176 | 371,574 | 1,151,550 | 1,342,277 | 2,162,656 | ||
Enterprise Value | 15,867,343 | 171391.101108033 | 221190.608190545 | 241031.485290258 | 646627.363413935 | 652463.539057172 | 13934639.1752577 | |
Equity Value | 13,222,786 | |||||||
Equity price per share (equity value/ shares outstanding) | 7 |
Looking for best Finance Assignment Help. Whatsapp us at +16469488918 or chat with our chat representative showing on lower right corner or order from here. You can also take help from our Live Assignment helper for any exam or live assignment related assistance