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Question

<div class="txt-body question-body"><div class="feedback-rating abuse-flag" data-questionid="12226107"></div><div class="ugc-base"><p>onsider following condition for previous question:</p><p>The investor takes $<strong>200,000</strong> loan (at time zero)to purchase the machine at <strong>6%</strong> interest rate. Loanhas to be repaid by constant annual payments from year 1 to year 5(5 payments).</p><p>Assume <strong>38% tax</strong> and minimum rate of return<strong>10%</strong>.</p><p>Calculate interest and principle for the payments, BTCF, ATCF,NPV and IRR for this investment.</p></div></div>

Explanation / Answer

&lt;div class=&quot;txt-body answer-body&quot;&gt; &lt;div class=&quot;answer-given-body ugc-base&quot;&gt; &lt;p&gt;To calculate the interest and principle for annual payments ,given in the problem&lt;/p&gt;&lt;ul&gt;&lt;li&gt;&lt;p&gt;The loan is $2,00,000&lt;/p&gt;&lt;/li&gt;&lt;li&gt;&lt;p&gt;In interest is @ 6% per annum payable once in year&lt;/p&gt;&lt;/li&gt;&lt;li&gt;&lt;p&gt;The loan has to repaid in 5 years with interest&lt;/p&gt;&lt;/li&gt;&lt;/ul&gt;&lt;p&gt;We will first calculate the total interest to be paid for 5years&lt;/p&gt;&lt;p&gt;Total interest = 2,00,000 *6% *5&lt;/p&gt;&lt;p&gt;Total interest = 12000 * 5 = 60,000&lt;/p&gt;&lt;p&gt;The total payment to be made in 5 years is principal andinterest is $2,60,000&lt;/p&gt;&lt;p&gt;The per annum EMI is 2,60,000 /5 is $ 52000 in which principalis $40,000 and interest is $12,000&lt;/p&gt;&lt;p&gt;for BTCF,ATCF,NPV,IRR the cash flow details is required . thedetails are not provided in the question&lt;/p&gt; &lt;/div&gt; &lt;/div&gt;

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