Busn214 SIBWMOE 2007 Chapter06rom MG irvin

Pages to are hidden for

"Busn214 SIBWMOE 2007 Chapter06rom MG irvin"

```					                   Receive \$1 today or \$1 one year from now?
Annual
Simple       Which do you
Today Value     Value in 1 year Interest Rate prefer?
today                                                     10%

year from now

PV               FV

You can think of You can think of
PV as taking     FV as adding
interest "OUT". interest "IN".
Interest

1)                                      Interest is like rent on money
If you put money in the bank, you would like to know what it is worth with
all the interest added in on some future date. This amount is called
2)                                              Future Value.
=FV(rate = period rate, nper = total number of periods, pmt means
periodic payment, pv means amount invested or lent out today, type
refers to the PMT: PMT at end of period = 0, PMT at beginning of period
3)                                                     = 1)
Cash Flow matters in Finance. Cash going out of the wallet is negative.
4)                                  Cash coming into the wallet is positive.
For the borrow the PV is positive, the PMT is negative, and the FV is
negative. For the Lender the PV is negative, the PMT is positive, and
5)                                            the FV is positive.

1                                 Simple Interest:
Principal (Amount loaned or amount still owed) = Present
Value = PV =                                                     \$ 100.00
Interest Rate for one year                                           10%
Interest Paid =
Total of Interest and Principal = Future Value = FV =
Total of Interest and Principal =                                \$ 110.00

2                             Compound Interest
Principal (Amount loaned or amount still owed) = Present
Value = PV =                                                     \$ 100.00

Interest Rate for one year, Compounded Monthly (This
means that at the end of each month they calculate the
interest owed to you, deposit it in the account, and then next
month they pay you interest on the original principal and the
interest added to the account (interest on interest)                10.0%
Number of months in one year =                                         12
Monthly Interest Rate = 10.00%/12 =                                           0.008333
Beg Balance                                                       100.00     \$ 100.00
1st month's Interest deposited into the account =
1st month       \$100.00*0.00833 =                                                                0.83
New Balance in the account after the interest is deposited
\$100.00 + \$0.83                                                                100.83
2nd month's Interest deposited into the account =
2nd month       \$100.83*0.00833 =                                                                0.84
New Balance in the account after the interest is deposited
\$100.83 + \$0.84                                                                101.67
3rd month's Interest deposited into the account =
3rd month       \$101.67*0.00833 =                                                                0.85
New Balance in the account after the interest is deposited
\$101.67 + \$0.85                                                                102.52
4th month's Interest deposited into the account =
4th month       \$102.52*0.00833 =                                                                0.85
New Balance in the account after the interest is deposited
\$102.52 + \$0.85                                                                103.38
5th month's Interest deposited into the account =
5th month       \$103.38*0.00833 =                                                                0.86
New Balance in the account after the interest is deposited
\$103.38 + \$0.86                                                                104.24
6th month's Interest deposited into the account =
6th month       \$104.24*0.00833 =                                                                0.87
New Balance in the account after the interest is deposited
\$104.24 + \$0.87                                                                105.11
7th month's Interest deposited into the account =
7th month       \$105.11*0.00833 =                                                                0.88
New Balance in the account after the interest is deposited
\$105.11 + \$0.88                                                                105.98
8th month's Interest deposited into the account =
8th month       \$105.98*0.00833 =                                                                0.88
New Balance in the account after the interest is deposited
\$105.98 + \$0.88                                                                106.86
9th month's Interest deposited into the account =
9th month       \$106.86*0.00833 =                                                                0.89
New Balance in the account after the interest is deposited
\$106.86 + \$0.89                                                                107.75
10th month's Interest deposited into the account =
10th month      \$107.75*0.00833 =                                                                0.90
New Balance in the account after the interest is deposited
\$107.75 + \$0.90                                                                108.65
11th month's Interest deposited into the account =
11th month      \$108.65*0.00833 =                                                                0.91
New Balance in the account after the interest is deposited
\$108.65 + \$0.91                                                                109.56
12th month's Interest deposited into the account =
12th month      \$109.56*0.00833 =                                                                0.91
New Balance in the account after the interest is deposited
\$109.56 + \$0.91                                                                110.47

Interest Paid =                                                      10.47
Interest Paid =                                                                   10.47
Total of Interest and Principal = Future Value = FV =               110.47
Total of Interest and Principal = Future Value = FV =                            110.47
3 Total of Interest and Principal = Future Value = FV =                           \$110.47
1)                            PMT means periodic payment (same amount each period)
PMT function calculates the period payment for a loan (For the Borrower or the Lender). The Amount of each PMT
2)                      must be the same and the time between each PMT must be the same.

3)  Cash Flow matters in Finance. Cash going out of the wallet is negative. Cash coming into the wallet is positive.
For the borrow the PV is positive, the PMT is negative, and the FV is negative. For the Lender the PV is negative,
4)                                      the PMT is positive, and the FV is positive.
Be consistent with your unit of time! If you are calculating monthly payment, you need monthly interest rate and
5)             total number of months! (The period can be monthly, quarterly, yearly or any other length).
=PMT(rate = period rate, nper = total number of periods, pv means amount invested or lent out today, fv means
amount received after all the periods have elapsed or amount paid after all the periods have elapsed, type refers
6)                      to the PMT: PMT at end of period = 0, PMT at beginning of period = 1)

=FV(rate = period rate, nper = total number of periods, pmt means periodic payment, pv means amount invested
7)          or lent out today, type refers to the PMT: PMT at end of period = 0, PMT at beginning of period = 1)

1 Borrower Point of View: At an Annual Interest Rate of 4.80% the monthly PMT paid = \$0.00
Price of Car                           \$34,799.00 Annual Interest Rate            4.80%
Down Payment                           \$10,000.00 Monthly Interest Rate
Loan Amount                                        Years for Loan                      5
Monthly Payment                                        Total Months
Monthly Payment                                     0 Periods per Year                       12

Lender Point of view: At an Annual Interest Rate of 4.80% the monthly PMT received =
2                                             \$0.00
Price of Car                             \$34,799.00 Annual Interest Rate                 4.80%
Down Payment                             \$10,000.00 Monthly Interest Rate                0.40%
Loan Amount                              \$24,799.00 Years for Loan                            5
Monthly Payment                                        Total Months                          60
Monthly Payment                         465.7188221 Periods per Year                         12

At an Annual Interest Rate of 5.25% and a balloon payment of \$5,000.00 at the end of 36
3              months, the monthly PMT = (\$1,225.21) - Borrower's Point of View.
Price of Car                             \$50,000.00    Annual Interest Rate              5.25%
Down Payment                              \$5,000.00    Monthly Interest Rate             0.44%
Loan Amount                              \$45,000.00    Years for Loan                         3
Balloon Payment                          (\$5,000.00)   Total Months                          36
Monthly Payment                                        Periods per Year                      12

At an Annual Interest Rate of 8.50% and no payments during the first year, the monthly
4                         PMT = (\$67,328.25) - Borrower's Point of View.
Loan Amount                           \$1,000,000.00 Annual Interest Rate                 8.50%
Years payment is put off                           1 Period Interest Rate                2.13%
FV after 1 year                                      Years for Loan                           6
Period Payment                                       Total Periods                           24
Period Payment                          (\$67,328.25) Periods per Year                         4
d)
er). The Amount of each PMT
e same.

ng into the wallet is positive.
e Lender the PV is negative,

ed monthly interest rate and
any other length).
d or lent out today, fv means
ds have elapsed, type refers
od = 1)

, pv means amount invested
ginning of period = 1)

check   1087748
=RATE(nper = total number of periods, pmt means
periodic payment, pv means amount invested or lent
out today, fv means amount received after all the
periods have elapsed or amount paid after all the
periods have elapsed, type refers to the pmt: pmt at
1)     end of period = 0, pmt at beginning of period = 1)

Be consistent with your unit of time! If you are
calculating monthly payment, you need monthly interest
rate and total number of months! (The period can be
2)      monthly, quarterly, yearly or any other length).
3)      Remember, RATE returns the period rate!!!!!!

Cash Flow matters in Finance. Cash going out of the wallet
4)      is negative. Cash coming into the wallet is positive.

For the borrow the PV is positive, the PMT is negative,
and the FV is negative. For the Lender the PV is
5) negative, the PMT is positive, and the FV is positive.

If you pay points, then you do not get to
use all the cash you borrowed. Therefore,
the Rate is really based on the cash you
receive, not the face value of the loan.
Annual
Item     House          Rate          5.00%
Monthly
Price    \$200,000       Rate          .00417
Down           \$0       Years             15
Loan     \$200,000       Months           180
Periods
Points           0.02   Per Year           12
Type (0 =
End, 1 =
PMT       -1,581.59     Begin)              0
Percentag
e Rate                               0.053081
Effective Interest Rate is always higher than APR or Nominal Rate when the compounding periods per year are
1)                          greater than . Why? Because you are earning interest on interest.
=EFFECT(nominal_rate means APR or Nominal Rate (APR = NOMINAL RATE = period interest rate * number of
2)             compounding periods in 1 year), npery means "number of compounding periods in 1 year")

3)  Cash Flow matters in Finance. Cash going out of the wallet is negative. Cash coming into the wallet is positive.
For the borrow the PV is positive, the PMT is negative, and the FV is negative. For the Lender the PV is negative,
4)                                      the PMT is positive, and the FV is positive.

Annual Interest Rate =
1 APR = Nominal Rate                               0.085
Period Rate
Periods per Year                                    12
Effective Annual Rate
Effective Annual Rate
unding periods per year are
erest.
riod interest rate * number of
periods in 1 year")

ng into the wallet is positive.
e Lender the PV is negative,
35d4b262-2141-49cc-99f4-493df729e409.xls - Loan Analysis

1)                                                   PMT means periodic payment (same amount each period)
PMT function calculates the period payment for a loan (For the Borrower or the Lender). The Amount of each PMT must be the same and the time between
2)                                                                  each PMT must be the same.
3)                         Cash Flow matters in Finance. Cash going out of the wallet is negative. Cash coming into the wallet is positive.

4) For the borrow the PV is positive, the PMT is negative, and the FV is negative. For the Lender the PV is negative, the PMT is positive, and the FV is positive.
Be consistent with your unit of time! If you are calculating monthly payment, you need monthly interest rate and total number of months! (The period can be
5)                                                            monthly, quarterly, yearly or any other length).

=PMT(rate = period rate, nper = total number of periods, pv means amount invested or lent out today, fv means amount received after all the periods have
6)        elapsed or amount paid after all the periods have elapsed, type refers to the PMT: PMT at end of period = 0, PMT at beginning of period = 1)

=RATE(nper = total number of periods, pmt means periodic payment, pv means amount invested or lent out today, fv means amount received after all the
7)      periods have elapsed or amount paid after all the periods have elapsed, type refers to the pmt: pmt at end of period = 0, pmt at beginning of period = 1)

Debt Analysis
% Down                                                        Amount to         Monthly       Actual Cash      Adjusted       PMT w
Option#           Payment       APR     Years        Points       Extra Fee      Borrow           Payment        Received          APR          Balloon
1            5.0%       8.50%    30                 1          400
2           15.0%       8.25%    30                 3          400
3            4.5%       8.90%    30                 1          450
4           12.0%       9.00%    30                 2          100
5           15.0%       8.50%    30                 2          125
6           20.0%       8.00%    15                 0          500
7           15.0%       7.60%    15                 1          750

Price          \$ 430,000.00
Compoun
ding
Periods
per year                  12
Balloon
Payment
(Optional)     \$   (50,000.00)

Page 8 of 82
APR = Annual Percentage Rate = NOMINAL RATE = period interest rate * number of
1)          compounding periods in 1 year. This is the rate usually calculated by the bank.
Effective Interest Rate is always higher than APR or Nominal Rate when the compounding
periods per year are greater than . Why? Because you are earning interest on interest - The
Effective Interest Rate tells you in percentage terms what the rate really is (You could multiply it
2)                            plus 1 by the principal and get Future Value)

3)      =EFFECT(APR or Nominal Rate, npery means "number of compounding periods in 1 year")

4) =NOMINAL(Effective Interest Rate), npery means "number of compounding periods in 1 year")
=FV(rate = period rate, nper = total number of periods, pmt means periodic payment, pv means
amount invested or lent out today, type refers to the PMT: PMT at end of period = 0, PMT at
5)                                      beginning of period = 1)
Cash Flow matters in Finance. Cash going out of the wallet is negative. Cash coming into the
6)                                          wallet is positive.
For the borrow the PV is positive, the PMT is negative, and the FV is negative. For the Lender
7)                  the PV is negative, the PMT is positive, and the FV is positive.
Be consistent with your unit of time! If you are calculating monthly payment, you need monthly
interest rate and total number of months! (The period can be monthly, quarterly, yearly or any
8)                                            other length).

Savings Plan that compounds interest 365 times a year, but you put money in 12
1                                   times a year.
Monthly PMT =                                        -250
x = years                                              25
n for account is =                                    365
APR = i =                                            0.08
Type= 0 or 1 ==>                                        0
check
Solve for EAR first =                                                                  0.0832776
n for PMT =                                              12
Then from EAR, find APR (i) ==>
Then from APR (i), find period Rate ==>
Solve for Future Value =

2                                   MoneyTreeLoaning will:
Allow you to write a check that has a date 25 days in the future for \$250 and will
give you \$200 today (they cash check in 25 days).
What is the APR and EAR?
Days in Future =                                         25
Check Amount =                                          250               FV
You get Today =                                         200               PV
25 day rate is =
Days in Year =                                          365
# of 25 day periods in 1 year =
APR =
EAR =                                      <== correct because math formula does not truncate to an inte

EAR =                                      <== Incorrect because the EFFECT function truncates npery to a

Excel Help:
Npery is truncated to an integer.
If either argument is nonnumeric, EFFECT returns the #VALUE! error value.
If nominal_rate ≤ 0 or if npery < 1, EFFECT returns the #NUM! error value.
EFFECT is calculated as follows:
oes not truncate to an integer

nction truncates npery to an integer
NPER function calculates the = total number of periods = Years*Number of
compounding periods per year. Example 30 year loan compounded 12
1)                  times a year ==> 12*30 = 360 = Total periods.
=NPER(rate = period Rate, pmt means periodic payment, pv means
amount invested or lent out today, fv means amount received after all the
periods have elapsed or amount paid after all the periods have elapsed,
type refers to the pmt: pmt at end of period = 0, pmt at beginning of period
2)                                        = 1)
Be consistent with your unit of time! If you are calculating monthly payment,
you need monthly interest rate and total number of months! (The period
3)              can be monthly, quarterly, yearly or any other length).
Cash Flow matters in Finance. Cash going out of the wallet is negative.
4)                      Cash coming into the wallet is positive.
For the borrow the PV is positive, the PMT is negative, and the FV is
negative. For the Lender the PV is negative, the PMT is positive, and the
5)                                   FV is positive.

How long to pay off your credit Card if you pay only the
minimum PMT required?
Balance = PV =                 2,000.00
APR = i =                        18.00%               Type
n=                                    12                       0
Minimum Monthly PMT =              41.00
n*x = NPER function =
x = n*x/n = years
Words:
35d4b262-2141-49cc-99f4-493df729e409.xls - SLN & DB

SLN is a built-in function that calculates Straight Line Depreciation. For Financial Accounting, the
Depreciation Method should match the expense to the pattern of cash flows generated by the asset.
1)                SLN is for assets that generate even cash flows over the life of the asset.

DBB is a built-in function that calculates Double Declining Balance Depreciation. For Financial
Accounting, the Depreciation Method should match the expense to the pattern of cash flows generated
2)   by the asset. DB is for assets that generate more cash flows in the earlier years of the asset's life.

Depreciation Calculation
Asset Value:                  \$                        170,000
Salvage Value:                \$                          5,000
Life:                                                        20
1 Straight Line Depreciation:

2 Rate for DDB =                                                2
Year:                                         DDB
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Page 14 of 82
Preset Value = How much future cash flows are worth today. Think of it as interest
going backwards; if we put money in the bank today (present value) it will be worth
some future value amount in the future: Present Value is the Opposite! We want to
receive some cash amounts in the future, what amount do we have to put in the
1)                                    bank today?

PV function calculates present Value when the cash flows are the same and are
separated by regular time periods. NPV function lets us calculate the present value
when the amounts are not the same. XNPV function lets us calculate the present
2)    value when the amounts are not the same and the times are not the same.
When an asset has an annuity cash flo
Capital Investment Decision. An ann
3)                             =PV( rate, nper, fv, type)                                                                     inte
=NPV( rate, CF1, CF2…. (as range or cells separated by commas). NOTE: You          Calculates the net present value for a s
4)                       cannot include Cash Flow at time 0.                                                       time between
Returns the net present value for a sch
periodic. To calculate the net presen
5)       =XNPV(rate, values, dates) NOTE: you can include Cash Flow at time 0.                                    periodic, use t
Cash Flow matters in Finance. Cash going out of the wallet is negative. Cash
6)                          coming into the wallet is positive.

For the borrow the PV is positive, the PMT is negative, and the FV is negative. For
7)      the Lender the PV is negative, the PMT is positive, and the FV is positive.
Be consistent with your unit of time! If you are calculating monthly payment, you
need monthly interest rate and total number of months! (The period can be
8)                   monthly, quarterly, yearly or any other length).

You are considering buying a machine that will yield \$35,000.00 net cash flow in
for the next ten years. If you must earn a minimum return on investment of
1                15.00%, should buy a machine if it costs (\$165,500.00)?

Net Cash Flow at end of each year =                \$                   35,000.00
Min Return (hurdle rate or Discount Rate) =                                  15%
Cost =                                             \$                 (165,500.00)
Years                                                                          10
PV =
Difference =
NPV =

2                        Period                                     CF
0
1   \$                   35,000.00
2   \$                   35,000.00
3   \$                   35,000.00
4   \$                   35,000.00
5   \$                   35,000.00
6   \$                   35,000.00
7   \$                   35,000.00
8   \$                   35,000.00
9   \$                   35,000.00
10   \$                   35,000.00
3 RRR                     0.15

Date              Year          CF        PV
1/1/2007            0     - 500.00    - 500.00
1/1/2008            1       200.00      173.91
1/1/2010            3       100.00       65.73
1/1/2011            4       100.00       57.15
1/1/2012            5       100.00       49.70
1/1/2013            6       100.00       43.20
- 110.31

1/1/2009
366
sset has an annuity cash flow pattern, you can use the PV function for
nvestment Decision. An annuity has equal payments at equal time
intervals.
the net present value for a series of cash flows that is periodic (equal
time between each cash flow)
net present value for a schedule of cash flows that is not necessarily
To calculate the net present value for a series of cash flows that is
periodic, use the NPV function.
PV        XNPV
- 500.00
173.91
65.75
57.18
49.72
43.23
- 110.21
FV function calculates the future value of a lump sum (invested at very
beginning) or regular payments (called PMT and amount is the same for
1)                each period and the amount is always the same).
2)            PMT means periodic payment (same amount each period)
PMT function calculates the period payment for a loan (For the Borrower
or the Lender). The Amount of each PMT must be the same and the
3)                   time between each PMT must be the same.
Cash Flow matters in Finance. Cash going out of the wallet is negative.
Cash coming into the wallet is positive. Time period Matters in Finance:
Example - if you are making monthly payments, then total number of
4)                     periods must be total number of months.
For the borrow the PV is positive, the PMT is negative, and the FV is
negative. For the Lender the PV is negative, the PMT is positive, and the
5)                                  FV is positive.
=FV(rate = period rate, nper = total number of periods, pmt means
periodic payment, pv means amount invested or lent out today, type
refers to the PMT: PMT at end of period = 0, PMT at beginning of period
6)                                       = 1)
=PMT(rate = period rate, nper = total number of periods, pv means
amount invested or lent out today, fv means amount received after all the
periods have elapsed or amount paid after all the periods have elapsed,
type refers to the PMT: PMT at end of period = 0, PMT at beginning of
7)                                    period = 1)

Monthly PMT                         Amount put in
years                               Amount taken out
Months                              Interest
Annual Rate
Monthly Rate
FV

PV
years
Months
Annual Rate
Monthly Rate
Monthly PMT
An Amortization table breaks apart your Period PMT into 2 pieces: 1) How much goes to reducing the loan balanc
1)                                                        the bank takes as interest.
2)                                                                 #NAME?

3)      An alternative to using the IPMT function to calculate the period interest, use (Balance From Period Before)*(Pe
4)          An alternative to using the PPMT function to calculate the period Principal Reduction, use (Period PMT )-(Pe
5)                                  Use the IF function to help make you Amortization Table more "Updateable".

Item             House             Annual Rate                               8.25%
Price               \$450,000.00    Monthly Rate                         0.00687500
Down                 \$45,000.00    Years                                         30
Loan                \$405,000.00    Months                                       360
PMT                    -3,042.63   Periods Per Year                              12
PMT                     3,042.63   Type (0 = End, 1 = Begin)                      0
PMT                     3,042.63   Total PMT Paid                              0.00
PMT                     3,042.63   Total Interest Paid                       \$0.00
Total Principal Paid from PMT             \$0.00
Total Principal Paid with Down         45,000.00
Total Paid                             45,000.00

Interest Paid (Amount that you
can deduct/earn for taxes and
Periods          PMT               on income statement)             Loan Reduction
ow much goes to reducing the loan balance and 2) How much
interest.

st, use (Balance From Period Before)*(Period Interest Rate)   =IPMT(
Principal Reduction, use (Period PMT )-(Period Interest)      =PPMT(
tization Table more "Updateable".

Balance
Item           House             Annual Rate                               6.00%
Price             \$150,000.00    Monthly Rate                         0.01500000
Down                    \$0.00    Years                                         15
Loan              \$150,000.00    Months                                        60
PMT                  -3,809.01   Periods Per Year                               4
PMT                   3,809.01   Type (0 = End, 1 = Begin)                      0
PMT                   3,809.01   Total PMT Paid                        228,541.01
PMT                   3,809.01   Total Interest Paid                  \$78,541.01
Total Principal Paid from PMT       \$150,000.00
Total Principal Paid with Down        150,000.00
Total Paid                            228,541.01

Interest Paid (Amount that you
can deduct/earn for taxes and
Periods        PMT               on income statement)             Loan Reduction Balance
0                                                                         150,000.00
1         3,809.01                          2,250.00         1,559.01     148,440.99
2         3,809.01                          2,226.61         1,582.40     146,858.59
3         3,809.01                          2,202.88         1,606.13     145,252.46
4         3,809.01                          2,178.79         1,630.22     143,622.24
5         3,809.01                          2,154.33         1,654.68     141,967.56
6         3,809.01                          2,129.51         1,679.50     140,288.06
7         3,809.01                          2,104.32         1,704.69     138,583.37
8         3,809.01                          2,078.75         1,730.26     136,853.11
9         3,809.01                          2,052.80         1,756.21     135,096.90
10         3,809.01                          2,026.45         1,782.56     133,314.34
11         3,809.01                          1,999.72         1,809.29     131,505.05
12         3,809.01                          1,972.58         1,836.43     129,668.62
13         3,809.01                          1,945.03         1,863.98     127,804.64
14         3,809.01                          1,917.07         1,891.94     125,912.70
15         3,809.01                          1,888.69         1,920.32     123,992.38
16         3,809.01                          1,859.89         1,949.12     122,043.26
17         3,809.01                          1,830.65         1,978.36     120,064.90
18         3,809.01                          1,800.97         2,008.04     118,056.86
19         3,809.01                          1,770.85         2,038.16     116,018.70
20         3,809.01                          1,740.28         2,068.73     113,949.97
21         3,809.01                          1,709.25         2,099.76     111,850.21
22         3,809.01                          1,677.75         2,131.26     109,718.95
23         3,809.01                          1,645.78         2,163.23     107,555.72
24         3,809.01                          1,613.34         2,195.67     105,360.05
25         3,809.01                          1,580.40         2,228.61     103,131.44
26         3,809.01                          1,546.97         2,262.04     100,869.40
27         3,809.01                          1,513.04         2,295.97      98,573.43
28         3,809.01                          1,478.60         2,330.41      96,243.02
29         3,809.01                          1,443.65         2,365.36      93,877.66
30         3,809.01                          1,408.16         2,400.85      91,476.81
31         3,809.01                          1,372.15         2,436.86      89,039.95
32         3,809.01                          1,335.60         2,473.41      86,566.54
33         3,809.01                          1,298.50         2,510.51      84,056.03
34         3,809.01                          1,260.84         2,548.17      81,507.86
35         3,809.01                          1,222.62         2,586.39      78,921.47
36         3,809.01                          1,183.82         2,625.19      76,296.28
37   3,809.01   1,144.44   2,664.57   73,631.71
38   3,809.01   1,104.48   2,704.53   70,927.18
39   3,809.01   1,063.91   2,745.10   68,182.08
40   3,809.01   1,022.73   2,786.28   65,395.80
41   3,809.01     980.94   2,828.07   62,567.73
42   3,809.01     938.52   2,870.49   59,697.24
43   3,809.01     895.46   2,913.55   56,783.69
44   3,809.01     851.76   2,957.25   53,826.44
45   3,809.01     807.40   3,001.61   50,824.83
46   3,809.01     762.37   3,046.64   47,778.19
47   3,809.01     716.67   3,092.34   44,685.85
48   3,809.01     670.29   3,138.72   41,547.13
49   3,809.01     623.21   3,185.80   38,361.33
50   3,809.01     575.42   3,233.59   35,127.74
51   3,809.01     526.92   3,282.09   31,845.65
52   3,809.01     477.68   3,331.33   28,514.32
53   3,809.01     427.71   3,381.30   25,133.02
54   3,809.01     377.00   3,432.01   21,701.01
55   3,809.01     325.52   3,483.49   18,217.52
56   3,809.01     273.26   3,535.75   14,681.77
57   3,809.01     220.23   3,588.78   11,092.99
58   3,809.01     166.39   3,642.62    7,450.37
59   3,809.01     111.76   3,697.25    3,753.12
60   3,809.42      56.30   3,753.12        0.00
61        -          -          -           -
62        -          -          -           -
63        -          -          -           -
64        -          -          -           -
65        -          -          -           -
66        -          -          -           -
67        -          -          -           -
68        -          -          -           -
69        -          -          -           -
70        -          -          -           -
71        -          -          -           -
72        -          -          -           -
73        -          -          -           -
74        -          -          -           -
75        -          -          -           -
76        -          -          -           -
77        -          -          -           -
78        -          -          -           -
79        -          -          -           -
80        -          -          -           -
81        -          -          -           -
82        -          -          -           -
83        -          -          -           -
84        -          -          -           -
85        -          -          -           -
86        -          -          -           -
87        -          -          -           -
88        -          -          -           -
89   -   -   -   -
90   -   -   -   -
91   -   -   -   -
92   -   -   -   -
93   -   -   -   -
94   -   -   -   -
95   -   -   -   -
96   -   -   -   -
97   -   -   -   -
98   -   -   -   -
99   -   -   -   -
100   -   -   -   -
101   -   -   -   -
102   -   -   -   -
103   -   -   -   -
104   -   -   -   -
105   -   -   -   -
106   -   -   -   -
107   -   -   -   -
108   -   -   -   -
109   -   -   -   -
110   -   -   -   -
111   -   -   -   -
112   -   -   -   -
113   -   -   -   -
114   -   -   -   -
115   -   -   -   -
116   -   -   -   -
117   -   -   -   -
118   -   -   -   -
119   -   -   -   -
120   -   -   -   -
121   -   -   -   -
122   -   -   -   -
123   -   -   -   -
124   -   -   -   -
125   -   -   -   -
126   -   -   -   -
127   -   -   -   -
128   -   -   -   -
129   -   -   -   -
130   -   -   -   -
131   -   -   -   -
132   -   -   -   -
133   -   -   -   -
134   -   -   -   -
135   -   -   -   -
136   -   -   -   -
137   -   -   -   -
138   -   -   -   -
139   -   -   -   -
140   -   -   -   -
141   -   -   -   -
142   -   -   -   -
143   -   -   -   -
144   -   -   -   -
145   -   -   -   -
146   -   -   -   -
147   -   -   -   -
148   -   -   -   -
149   -   -   -   -
150   -   -   -   -
151   -   -   -   -
152   -   -   -   -
153   -   -   -   -
154   -   -   -   -
155   -   -   -   -
156   -   -   -   -
157   -   -   -   -
158   -   -   -   -
159   -   -   -   -
160   -   -   -   -
161   -   -   -   -
162   -   -   -   -
163   -   -   -   -
164   -   -   -   -
165   -   -   -   -
166   -   -   -   -
167   -   -   -   -
168   -   -   -   -
169   -   -   -   -
170   -   -   -   -
171   -   -   -   -
172   -   -   -   -
173   -   -   -   -
174   -   -   -   -
175   -   -   -   -
176   -   -   -   -
177   -   -   -   -
178   -   -   -   -
179   -   -   -   -
180   -   -   -   -
181   -   -   -   -
182   -   -   -   -
183   -   -   -   -
184   -   -   -   -
185   -   -   -   -
186   -   -   -   -
187   -   -   -   -
188   -   -   -   -
189   -   -   -   -
190   -   -   -   -
191   -   -   -   -
192   -   -   -   -
193   -   -   -   -
194   -   -   -   -
195   -   -   -   -
196   -   -   -   -
197   -   -   -   -
198   -   -   -   -
199   -   -   -   -
200   -   -   -   -
201   -   -   -   -
202   -   -   -   -
203   -   -   -   -
204   -   -   -   -
205   -   -   -   -
206   -   -   -   -
207   -   -   -   -
208   -   -   -   -
209   -   -   -   -
210   -   -   -   -
211   -   -   -   -
212   -   -   -   -
213   -   -   -   -
214   -   -   -   -
215   -   -   -   -
216   -   -   -   -
217   -   -   -   -
218   -   -   -   -
219   -   -   -   -
220   -   -   -   -
221   -   -   -   -
222   -   -   -   -
223   -   -   -   -
224   -   -   -   -
225   -   -   -   -
226   -   -   -   -
227   -   -   -   -
228   -   -   -   -
229   -   -   -   -
230   -   -   -   -
231   -   -   -   -
232   -   -   -   -
233   -   -   -   -
234   -   -   -   -
235   -   -   -   -
236   -   -   -   -
237   -   -   -   -
238   -   -   -   -
239   -   -   -   -
240   -   -   -   -
241   -   -   -   -
242   -   -   -   -
243   -   -   -   -
244   -   -   -   -
245   -   -   -   -
246   -   -   -   -
247   -   -   -   -
248   -   -   -   -
249   -   -   -   -
250   -   -   -   -
251   -   -   -   -
252   -   -   -   -
253   -   -   -   -
254   -   -   -   -
255   -   -   -   -
256   -   -   -   -
257   -   -   -   -
258   -   -   -   -
259   -   -   -   -
260   -   -   -   -
261   -   -   -   -
262   -   -   -   -
263   -   -   -   -
264   -   -   -   -
265   -   -   -   -
266   -   -   -   -
267   -   -   -   -
268   -   -   -   -
269   -   -   -   -
270   -   -   -   -
271   -   -   -   -
272   -   -   -   -
273   -   -   -   -
274   -   -   -   -
275   -   -   -   -
276   -   -   -   -
277   -   -   -   -
278   -   -   -   -
279   -   -   -   -
280   -   -   -   -
281   -   -   -   -
282   -   -   -   -
283   -   -   -   -
284   -   -   -   -
285   -   -   -   -
286   -   -   -   -
287   -   -   -   -
288   -   -   -   -
289   -   -   -   -
290   -   -   -   -
291   -   -   -   -
292   -   -   -   -
293   -   -   -   -
294   -   -   -   -
295   -   -   -   -
296   -   -   -   -
297   -   -   -   -
298   -   -   -   -
299   -   -   -   -
300   -   -   -   -
301   -   -   -   -
302   -   -   -   -
303   -   -   -   -
304   -   -   -   -
305   -   -   -   -
306   -   -   -   -
307   -   -   -   -
308   -   -   -   -
309   -   -   -   -
310   -   -   -   -
311   -   -   -   -
312   -   -   -   -
313   -   -   -   -
314   -   -   -   -
315   -   -   -   -
316   -   -   -   -
317   -   -   -   -
318   -   -   -   -
319   -   -   -   -
320   -   -   -   -
321   -   -   -   -
322   -   -   -   -
323   -   -   -   -
324   -   -   -   -
325   -   -   -   -
326   -   -   -   -
327   -   -   -   -
328   -   -   -   -
329   -   -   -   -
330   -   -   -   -
331   -   -   -   -
332   -   -   -   -
333   -   -   -   -
334   -   -   -   -
335   -   -   -   -
336   -   -   -   -
337   -   -   -   -
338   -   -   -   -
339   -   -   -   -
340   -   -   -   -
341   -   -   -   -
342   -   -   -   -
343   -   -   -   -
344   -   -   -   -
345   -   -   -   -
346   -   -   -   -
347   -   -   -   -
348   -   -   -   -
349   -   -   -   -
350   -   -   -   -
351   -   -   -   -
352   -   -   -   -
353   -   -   -   -
354   -   -   -   -
355   -   -   -   -
356   -   -   -   -
357   -   -   -   -
358   -   -   -   -
359   -   -   -   -
360   -   -   -   -
35d4b262-2141-49cc-99f4-493df729e409.xls - Tax

=CUMIPMT( rate = period rate, nper = total periods, pv = loan balance at beginning, start_period = 1st period that you want to add the interest,
1)                                           end_period = last period that you want to add the interest)
2)                                            The Tax column tells us how much we save on our taxes
3)                      Net Cash out is the actual cash you will have paid out that is associated with the Interest Expense

28.00% Tax Rate

Cumulative
Year          Interest For Year         TAX             Net cash out         Item        House          Annual Rate                       6.00%
1                                     -                  -         Price       \$150,000.00    Monthly Rate                 0.01500000
2                                     -                  -         Down              \$0.00    Years                                 15
3                                     -                  -         Loan        \$150,000.00    Months                                60
4                                     -                  -         PMT            -3,809.01   Periods Per Year                       4
5                                     -                  -                                    Type (0 = End, 1 = Begin)              0
6                                     -                  -
7                                     -                  -
8                                     -                  -
9                                     -                  -
10                                     -                  -
11                                     -                  -
12                                     -                  -
13                                     -                  -
14                                     -                  -
15                                     -                  -
16                                     -                  -
17                                     -                  -
18                                     -                  -
19                                     -                  -
20                                     -                  -
21                                     -                  -
22                                     -                  -
23                                     -                  -
24                                     -                  -
25                                     -                  -
26                                     -                  -
27                                     -                  -
28                                     -                  -
29                                     -                  -
30                                     -                  -

Page 52 of 82
35d4b262-2141-49cc-99f4-493df729e409.xls - Tax (2)

=CUMIPMT( rate = period rate, nper = total periods, pv = loan balance at beginning, start_period = 1st period that you want to add the interest,
1)                                           end_period = last period that you want to add the interest)
2)                                            The Tax column tells us how much we save on our taxes
3)                      Net Cash out is the actual cash you will have paid out that is associated with the Interest Expense

28.00% Tax Rate

Cumulative
Year          Interest For Year         TAX             Net cash out         Item        House          Annual Rate                       6.00%
1           (8,858.28)         (2,480.32)          (6,377.96)      Price       \$150,000.00    Monthly Rate                 0.01500000
2           (8,466.92)         (2,370.74)          (6,096.18)      Down              \$0.00    Years                                 15
3           (8,051.54)         (2,254.43)          (5,797.11)      Loan        \$150,000.00    Months                                60
4           (7,610.67)         (2,130.99)          (5,479.68)      PMT            -3,809.01   Periods Per Year                       4
5           (7,142.75)         (1,999.97)          (5,142.78)                                 Type (0 = End, 1 = Begin)              0
6           (6,646.12)         (1,860.91)          (4,785.20)
7           (6,119.01)         (1,713.32)          (4,405.69)
8           (5,559.55)         (1,556.67)          (4,002.88)
9           (4,965.77)         (1,390.42)          (3,575.35)
10           (4,335.55)         (1,213.95)          (3,121.59)
11           (3,666.65)         (1,026.66)          (2,639.99)
12           (2,956.71)           (827.88)          (2,128.83)
13           (2,203.21)           (616.90)          (1,586.31)
14           (1,403.47)           (392.97)          (1,010.50)
15             (554.65)           (155.30)            (399.35)
16        #NUM!                       -                   -
17        #NUM!                       -                   -
18        #NUM!                       -                   -
19        #NUM!                       -                   -
20        #NUM!                       -                   -
21        #NUM!                       -                   -
22        #NUM!                       -                   -
23        #NUM!                       -                   -
24        #NUM!                       -                   -
25        #NUM!                       -                   -
26        #NUM!                       -                   -
27        #NUM!                       -                   -
28        #NUM!                       -                   -
29        #NUM!                       -                   -
30        #NUM!                       -                   -

Page 53 of 82
35d4b262-2141-49cc-99f4-493df729e409.xls - Tax (an)

28.00% Tax Rate

Cumulative
Year        Interest For Year        TAX           Net cash out              Item        House          Annual Rate                      6.00%
1           (8,858.28)        (2,480.32)        (6,377.96)           Price       \$150,000.00    Monthly Rate                0.01500000
2           (8,466.92)        (2,370.74)        (6,096.18)           Down              \$0.00    Years                                15
3           (8,051.54)        (2,254.43)        (5,797.11)           Loan        \$150,000.00    Months                               60
4           (7,610.67)        (2,130.99)        (5,479.68)           PMT            -3,809.01   Periods Per Year                      4
5           (7,142.75)        (1,999.97)        (5,142.78)                                      Type (0 = End, 1 = Begin)             0
6           (6,646.12)        (1,860.91)        (4,785.20)
7           (6,119.01)        (1,713.32)        (4,405.69)
8           (5,559.55)        (1,556.67)        (4,002.88)
9           (4,965.77)        (1,390.42)        (3,575.35)
10           (4,335.55)        (1,213.95)        (3,121.59)
11           (3,666.65)        (1,026.66)        (2,639.99)
12           (2,956.71)          (827.88)        (2,128.83)
13           (2,203.21)          (616.90)        (1,586.31)
14           (1,403.47)          (392.97)        (1,010.50)
15             (554.65)          (155.30)          (399.35)
16                 -                 -                 -
17                 -                 -                 -
18                 -                 -                 -
19                 -                 -                 -
20                 -                 -                 -
21                 -                 -                 -
22                 -                 -                 -
23                 -                 -                 -
24                 -                 -                 -
25                 -                 -                 -
26                 -                 -                 -
27                 -                 -                 -
28                 -                 -                 -
29                 -                 -                 -
30                 -                 -                 -

Page 54 of 82
How long to pay off your credit Card if you pay only the minimum PMT
required?
Balance = PV =                2,000.00
APR = i =                        18.00%              Type
n=                                     12                      0
Minimum Monthly PMT =              41.00
n*x = NPER function =         88.36799
x = n*x/n =                   7.363999
It will take 7.36399935665702 years to pay off the
credit card if we make only the minimum payment each
Words:                                                 period.
MoneyTreeLoaning will:

Allow you to write a check that has a date 25 days in the future for \$250 and will give you \$200 today (they cash check in 2
What is the APR and EAR?
Days in Future =                                                               25
Check Amount =                                                               250              FV
You get Today =                                                              200              PV
25 day rate is =                                                             0.25
Days in Year =                                                            365.00
# of 25 day periods in 1 year =                                            14.60
APR =                                                                        3.65
EAR =                                                                      24.99 <== correct because math formula does not

EAR =                                                                      24.62 <== Incorrect because the EFFECT function t

Excel Help:
Npery is truncated to an integer.
If either argument is nonnumeric, EFFECT returns the #VALUE! error value.
If nominal_rate ≤ 0 or if npery < 1, EFFECT returns the #NUM! error value.
EFFECT is calculated as follows:
u \$200 today (they cash check in 25 days).

t because math formula does not truncate to an integer

ect because the EFFECT function truncates npery to an integer
Savings Plan that compounds interest 365 times a year, but you put money in 12
times a year.
Monthly PMT =                                         -250
x=                                                      25
n for account is =                                     365
APR = i =                                             0.08
Type= 0 or 1 ==>                                         0
check
1   Solve for EAR first =                         0.083277572              0.0832776
n for PMT =                                             12
2   Then from EAR, find APR (i) ==>               0.080258436
3   Then from APR (i), find period Rate ==>       0.006688203
4   Solve for Future Value =                      \$238,757.59

If we have a Savings Plan that compounds interest 365 times a year, but we put
5         \$250.00 in only 12 times a year, the Future Value would be \$238,757.59.
Interest

Interest is like rent on money

Simple Interest:
Principal (Amount loaned or amount still owed) =                                                      \$                     100.00
Interest Rate for one year                                                                                                     10%
Interest Paid =ROUND(B5*B4,2) =                                                                       \$                      10.00
Total of Interest and Principal =SUM(B4,B6) =                                                         \$                     110.00
Total of Interest and Principal =ROUND(B4*(1+B5),2) =                                                 \$                     110.00
FV             FV
Compound Interest                                                                 \$110.47     110.47
Principal (Amount loaned or amount still owed) =                                                      \$                     100.00

Interest Rate for one year, Compounded Monthly (This means that at the end of each month
they calculate the interest owed to you, deposit it in the account, and then next month they pay
you interest on the original principal and the interest added to the account (interest on interest)       10.00% Compounded Monthly
Number of months in one year =                                                                                                  12
Monthly Interest Rate = 10.00%/12 =                                                                            0.008333333333333330

1st month 1st month's Interest deposited into the account = \$100.00*0.00833333333333333 =                       \$                       0.83
New Balance in the account after the interest is deposited \$100.00 + \$0.83                           \$                     100.83
2nd month 2nd month's Interest deposited into the account = \$100.83*0.00833333333333333 =                                                0.84
New Balance in the account after the interest is deposited \$100.83 + \$0.84                           \$                     101.67
3rd month 3rd month's Interest deposited into the account = \$101.67*0.00833333333333333 =                                                0.85
New Balance in the account after the interest is deposited \$101.67 + \$0.85                           \$                     102.52
4th month 4th month's Interest deposited into the account = \$102.52*0.00833333333333333 =                                                0.85
New Balance in the account after the interest is deposited \$102.52 + \$0.85                           \$                     103.37
5th month 5th month's Interest deposited into the account = \$103.37*0.00833333333333333 =                                                0.86
New Balance in the account after the interest is deposited \$103.37 + \$0.86                           \$                     104.23
6th month 6th month's Interest deposited into the account = \$104.23*0.00833333333333333 =                                                0.87
New Balance in the account after the interest is deposited \$104.23 + \$0.87                           \$                     105.10
7th month 7th month's Interest deposited into the account = \$105.10*0.00833333333333333 =                                                0.88
New Balance in the account after the interest is deposited \$105.10 + \$0.88                           \$                     105.98
8th month 8th month's Interest deposited into the account = \$105.98*0.00833333333333333 =                                                0.88
New Balance in the account after the interest is deposited \$105.98 + \$0.88                           \$                     106.86
9th month 9th month's Interest deposited into the account = \$106.86*0.00833333333333333 =                                                0.89
New Balance in the account after the interest is deposited \$106.86 + \$0.89                           \$                     107.75
10th month 10th month's Interest deposited into the account = \$107.75*0.00833333333333333 =                                               0.9
New Balance in the account after the interest is deposited \$107.75 + \$0.90                           \$                     108.65
11th month 11th month's Interest deposited into the account = \$108.65*0.00833333333333333 =                                              0.91
New Balance in the account after the interest is deposited \$108.65 + \$0.91                           \$                     109.56
12th month 12th month's Interest deposited into the account = \$109.56*0.00833333333333333 =                                              0.91
New Balance in the account after the interest is deposited \$109.56 + \$0.91                           \$                     110.47

Interest Paid =                                                                                       \$                      10.47
Interest Paid =                                                                                       \$                      10.47
Total of Interest and Principal =                                                                     \$                     110.47
Total of Interest and Principal =                                                                     \$                     110.47
Total of Interest and Principal =                                                                                          \$110.47
Receive \$1 today or \$1 one year from now?
Today Value Value in 1 year Annual Simple Interest Rate
Receive \$1 today                \$     1.00 \$          1.10                        10%
Receive \$1 one year from now                \$         1.00
ow?
Which do you prefer?
I prefer this because I have earned interest.
Cash Flow matters in Finance. Cash going out of the wallet is negative.
Cash coming into the wallet is positive. Amazing Diagram on page 353.

Monthly PMT          \$200.00       Amount put in           \$60,000.00
years                      25      Amount taken out       \$673,354.19
Months                    300      Interest               \$613,354.19
Annual Rate              10%
Monthly Rate          0.833%
FV               \$265,366.68

PV               \$265,366.68
years                       35
Months                     420
Annual Rate             6.50%
Monthly Rate         0.5417%
Monthly PMT        \$1,603.22
Be consistent with your unit of time! If you are calculating monthly payment, you need
monthly interest rate and total number of months! (The period can be monthly, quarterly,
yearly or any other length).

Annual Interest Rate                          0.085
Month Rate                                0.007083
Periods per Year                                 12
Effective Annual Rate      0.08839090589263550000
Effective Annual Rate      0.08839090589263550000

At an Annual Interest Rate of 4.80% the monthly PMT = \$465.72
Price of Car                             \$34,799.00    Annual Interest Rate       4.80%
Down Payment                             \$10,000.00    Monthly Interest Rate      0.40%
Loan Amount                              \$24,799.00    Years for Loan                  5
Monthly Payment                            (\$465.72)   Total Months                   60
Monthly Payment                        -465.7188221    Periods per Year               12

At an Annual Interest Rate of 5.25% and a balloon payment of \$5,000.00 at the end
of 36 months, the monthly PMT = \$1,225.21
Price of Car                             \$50,000.00    Annual Interest Rate       5.25%
Down Payment                              \$5,000.00    Monthly Interest Rate      0.44%
Loan Amount                              \$45,000.00    Years for Loan                  3
Balloon Payment                          (\$5,000.00)   Total Months                   36
Monthly Payment                          (\$1,225.21)   Periods per Year               12

At an Annual Interest Rate of 8.50% and no payments during the first year, the
monthly PMT = (\$67,328.25)
Loan Amount                           \$1,000,000.00    Annual Interest Rate       8.50%
Years payment is put off                           1   Period Interest Rate       2.13%
FV after 1 year                      (\$1,087,747.96)   Years for Loan                  6
Period Payment                           \$67,328.25    Total Periods                  24
Period Payment                           \$67,328.25    Periods per Year                4

check
1087747.962

Item                       House                       Annual Rate                5.00%
Price                                  \$200,000.00     Monthly Rate          0.00416667
Down                                         \$0.00     Years                          15
Loan                                   \$200,000.00     Months                        180
Points                                         0.02    Periods Per Year               12
PMT                                       -1,581.59    Type (0 = End, 1 = Begin)       0
35d4b262-2141-49cc-99f4-493df729e409.xls - Depr. (an)

Depreciation Calculation
Asset Value:                  \$                      170,000
Salvage Value:                \$                        5,000
Life:                                                      20
Straight Line Depreciation:                        \$8,250.00

Rate for DDB =                                             2
Year:                                       DDB
1                      \$17,000.00
2                      \$15,300.00
3                      \$13,770.00
4                      \$12,393.00
5                      \$11,153.70
6                      \$10,038.33
7                       \$9,034.50
8                       \$8,131.05
9                       \$7,317.94
10                       \$6,586.15
11                       \$5,927.53
12                       \$5,334.78
13                       \$4,801.30
14                       \$4,321.17
15                       \$3,889.05
16                       \$3,500.15
17                       \$3,150.13
18                       \$2,835.12
19                       \$2,551.61
20                       \$2,296.45

Page 64 of 82
35d4b262-2141-49cc-99f4-493df729e409.xls - Loan Analysis (an)

Loan Analysis Worksheet
Purchase Price     \$ 430,000.00
Number of
Compounding
Periods/year                12
Optional Balloon
Payment            \$ (50,000.00)
Nominal    Durati                               Loan Value                      Actual
Down     Interest     on                                  (Subtract      Monthly        Amount       Adjusted   Payment with
Option#       Payment   Rate/yr     (yrs)      Points        Fees         Down)        Payment        Borrowed        APR        Balloon
1        5%        8.50%      30              1        400   \$ 408,500.00   \$ (3,141.01)   \$ 404,015.00    8.62%       (\$3,110.72)
2       15%        8.25%      30              3        400   \$ 365,500.00    (\$2,745.88)   \$ 354,135.00    8.59%     \$ (2,714.00)
3        5%        8.90%      30              1        450   \$ 410,650.00    (\$3,274.68)   \$ 406,093.50    9.02%     \$ (3,246.79)
4       12%        9.00%      30              2        100   \$ 378,400.00   \$ (3,044.69)   \$ 370,732.00    9.23%     \$ (3,017.38)
5       15%        8.50%      30              2        125   \$ 365,500.00   \$ (2,810.38)   \$ 358,065.00    8.72%     \$ (2,780.09)
6       20%        8.00%      15              0        500   \$ 344,000.00   \$ (3,287.44)   \$ 343,500.00    8.02%     \$ (3,142.95)
7       15%        7.60%      15              1        750   \$ 365,500.00   \$ (3,409.03)   \$ 361,095.00    7.80%     \$ (3,259.35)

Page 65 of 82
You are considering buying a machine that will yield \$35,000.00 net cash flow in
for the next ten years. If you must earn a minimum return on investment of
15.00%, should buy a machine if it costs (\$165,500.00)?

Net Cash Flow at end of each year =               \$                     35,000.00
Min Return =                                                                  15%
Cost =                                            \$                   (165,500.00)
Years                                                                           10
PV =                                                                 (\$175,656.90)
Difference =                                                           \$10,156.90
NPV =                                                                  \$10,156.90

Period                                      CF
0
1   \$                     35,000.00
2   \$                     35,000.00
3   \$                     35,000.00
4   \$                     35,000.00
5   \$                     35,000.00
6   \$                     35,000.00
7   \$                     35,000.00
8   \$                     35,000.00
9   \$                     35,000.00
10   \$                     35,000.00
Item           House             Annual Rate                               8.25%
Price             \$450,000.00    Monthly Rate                         0.00687500
Down               \$45,000.00    Years                                         25
Loan              \$405,000.00    Months                                       300
PMT                  -3,193.22   Periods Per Year                              12
PMT                   3,193.22   Type (0 = End, 1 = Begin)                      0
PMT                   3,193.22   Total PMT Paid                        858,135.72
PMT                   3,193.22   Total Interest Paid                 \$468,135.72
Total Principal Paid from PMT       \$405,000.00
Total Principal Paid with Down        450,000.00
Total Paid                            918,135.72

Interest Paid (Amount that you
can deduct/earn for taxes and
Periods        PMT               on income statement)             Loan Reduction Balance
0                                                                         405,000.00
1         3,193.22                          2,784.38           408.84     404,591.16
2         3,193.22                          2,781.56         5,411.66     399,179.50
3         3,193.22                          2,744.36           448.86     398,730.64
4         3,193.22                          2,741.27           451.95     398,278.69
5         3,193.22                          2,738.17           455.05     397,823.64
6         3,193.22                          2,735.04           458.18     397,365.46
7         3,193.22                          2,731.89           461.33     396,904.13
8         3,193.22                          2,728.72           464.50     396,439.63
9         3,193.22                          2,725.52           467.70     395,971.93
10         3,193.22                          2,722.31           470.91     395,501.02
11         3,193.22                          2,719.07        10,474.15     385,026.87
12         3,193.22                          2,647.06           546.16     384,480.71
13         3,193.22                          2,643.30           549.92     383,930.79
14         3,193.22                          2,639.52           553.70     383,377.09
15         3,193.22                          2,635.72           557.50     382,819.59
16         3,193.22                          2,631.88           561.34     382,258.25
17         3,193.22                          2,628.03           565.19     381,693.06
18         3,193.22                          2,624.14           569.08     381,123.98
19         3,193.22                          2,620.23           572.99     380,550.99
20         3,193.22                          2,616.29           576.93     379,974.06
21         3,193.22                          2,612.32           580.90     379,393.16
22         3,193.22                          2,608.33           584.89     378,808.27
23         3,193.22                          2,604.31           588.91     378,219.36
24         3,193.22                          2,600.26           592.96     377,626.40
25         3,193.22                          2,596.18           597.04     377,029.36
26         3,193.22                          2,592.08           601.14     376,428.22
27         3,193.22                          2,587.94           605.28     375,822.94
28         3,193.22                          2,583.78           609.44     375,213.50
29         3,193.22                          2,579.59           613.63     374,599.87
30         3,193.22                          2,575.37           617.85     373,982.02
31         3,193.22                          2,571.13           622.09     373,359.93
32         3,193.22                          2,566.85           626.37     372,733.56
33         3,193.22                          2,562.54           630.68     372,102.88
34         3,193.22                          2,558.21           635.01     371,467.87
35         3,193.22                          2,553.84           639.38     370,828.49
36         3,193.22                          2,549.45           643.77     370,184.72
37   3,193.22   2,545.02   648.20   369,536.52
38   3,193.22   2,540.56   652.66   368,883.86
39   3,193.22   2,536.08   657.14   368,226.72
40   3,193.22   2,531.56   661.66   367,565.06
41   3,193.22   2,527.01   666.21   366,898.85
42   3,193.22   2,522.43   670.79   366,228.06
43   3,193.22   2,517.82   675.40   365,552.66
44   3,193.22   2,513.17   680.05   364,872.61
45   3,193.22   2,508.50   684.72   364,187.89
46   3,193.22   2,503.79   689.43   363,498.46
47   3,193.22   2,499.05   694.17   362,804.29
48   3,193.22   2,494.28   698.94   362,105.35
49   3,193.22   2,489.47   703.75   361,401.60
50   3,193.22   2,484.64   708.58   360,693.02
51   3,193.22   2,479.76   713.46   359,979.56
52   3,193.22   2,474.86   718.36   359,261.20
53   3,193.22   2,469.92   723.30   358,537.90
54   3,193.22   2,464.95   728.27   357,809.63
55   3,193.22   2,459.94   733.28   357,076.35
56   3,193.22   2,454.90   738.32   356,338.03
57   3,193.22   2,449.82   743.40   355,594.63
58   3,193.22   2,444.71   748.51   354,846.12
59   3,193.22   2,439.57   753.65   354,092.47
60   3,193.22   2,434.39   758.83   353,333.64
61   3,193.22   2,429.17   764.05   352,569.59
62   3,193.22   2,423.92   769.30   351,800.29
63   3,193.22   2,418.63   774.59   351,025.70
64   3,193.22   2,413.30   779.92   350,245.78
65   3,193.22   2,407.94   785.28   349,460.50
66   3,193.22   2,402.54   790.68   348,669.82
67   3,193.22   2,397.11   796.11   347,873.71
68   3,193.22   2,391.63   801.59   347,072.12
69   3,193.22   2,386.12   807.10   346,265.02
70   3,193.22   2,380.57   812.65   345,452.37
71   3,193.22   2,374.99   818.23   344,634.14
72   3,193.22   2,369.36   823.86   343,810.28
73   3,193.22   2,363.70   829.52   342,980.76
74   3,193.22   2,357.99   835.23   342,145.53
75   3,193.22   2,352.25   840.97   341,304.56
76   3,193.22   2,346.47   846.75   340,457.81
77   3,193.22   2,340.65   852.57   339,605.24
78   3,193.22   2,334.79   858.43   338,746.81
79   3,193.22   2,328.88   864.34   337,882.47
80   3,193.22   2,322.94   870.28   337,012.19
81   3,193.22   2,316.96   876.26   336,135.93
82   3,193.22   2,310.93   882.29   335,253.64
83   3,193.22   2,304.87   888.35   334,365.29
84   3,193.22   2,298.76   894.46   333,470.83
85   3,193.22   2,292.61   900.61   332,570.22
86   3,193.22   2,286.42   906.80   331,663.42
87   3,193.22   2,280.19   913.03   330,750.39
88   3,193.22   2,273.91   919.31   329,831.08
89   3,193.22   2,267.59     925.63   328,905.45
90   3,193.22   2,261.22     932.00   327,973.45
91   3,193.22   2,254.82     938.40   327,035.05
92   3,193.22   2,248.37     944.85   326,090.20
93   3,193.22   2,241.87     951.35   325,138.85
94   3,193.22   2,235.33     957.89   324,180.96
95   3,193.22   2,228.74     964.48   323,216.48
96   3,193.22   2,222.11     971.11   322,245.37
97   3,193.22   2,215.44     977.78   321,267.59
98   3,193.22   2,208.71     984.51   320,283.08
99   3,193.22   2,201.95     991.27   319,291.81
100   3,193.22   2,195.13     998.09   318,293.72
101   3,193.22   2,188.27   1,004.95   317,288.77
102   3,193.22   2,181.36   1,011.86   316,276.91
103   3,193.22   2,174.40   1,018.82   315,258.09
104   3,193.22   2,167.40   1,025.82   314,232.27
105   3,193.22   2,160.35   1,032.87   313,199.40
106   3,193.22   2,153.25   1,039.97   312,159.43
107   3,193.22   2,146.10   1,047.12   311,112.31
108   3,193.22   2,138.90   1,054.32   310,057.99
109   3,193.22   2,131.65   1,061.57   308,996.42
110   3,193.22   2,124.35   1,068.87   307,927.55
111   3,193.22   2,117.00   1,076.22   306,851.33
112   3,193.22   2,109.60   1,083.62   305,767.71
113   3,193.22   2,102.15   1,091.07   304,676.64
114   3,193.22   2,094.65   1,098.57   303,578.07
115   3,193.22   2,087.10   1,106.12   302,471.95
116   3,193.22   2,079.49   1,113.73   301,358.22
117   3,193.22   2,071.84   1,121.38   300,236.84
118   3,193.22   2,064.13   1,129.09   299,107.75
119   3,193.22   2,056.37   1,136.85   297,970.90
120   3,193.22   2,048.55   1,144.67   296,826.23
121   3,193.22   2,040.68   1,152.54   295,673.69
122   3,193.22   2,032.76   1,160.46   294,513.23
123   3,193.22   2,024.78   1,168.44   293,344.79
124   3,193.22   2,016.75   1,176.47   292,168.32
125   3,193.22   2,008.66   1,184.56   290,983.76
126   3,193.22   2,000.51   1,192.71   289,791.05
127   3,193.22   1,992.31   1,200.91   288,590.14
128   3,193.22   1,984.06   1,209.16   287,380.98
129   3,193.22   1,975.74   1,217.48   286,163.50
130   3,193.22   1,967.37   1,225.85   284,937.65
131   3,193.22   1,958.95   1,234.27   283,703.38
132   3,193.22   1,950.46   1,242.76   282,460.62
133   3,193.22   1,941.92   1,251.30   281,209.32
134   3,193.22   1,933.31   1,259.91   279,949.41
135   3,193.22   1,924.65   1,268.57   278,680.84
136   3,193.22   1,915.93   1,277.29   277,403.55
137   3,193.22   1,907.15   1,286.07   276,117.48
138   3,193.22   1,898.31   1,294.91   274,822.57
139   3,193.22   1,889.41   1,303.81   273,518.76
140   3,193.22   1,880.44   1,312.78   272,205.98
141   3,193.22   1,871.42   1,321.80   270,884.18
142   3,193.22   1,862.33   1,330.89   269,553.29
143   3,193.22   1,853.18   1,340.04   268,213.25
144   3,193.22   1,843.97   1,349.25   266,864.00
145   3,193.22   1,834.69   1,358.53   265,505.47
146   3,193.22   1,825.35   1,367.87   264,137.60
147   3,193.22   1,815.95   1,377.27   262,760.33
148   3,193.22   1,806.48   1,386.74   261,373.59
149   3,193.22   1,796.94   1,396.28   259,977.31
150   3,193.22   1,787.34   1,405.88   258,571.43
151   3,193.22   1,777.68   1,415.54   257,155.89
152   3,193.22   1,767.95   1,425.27   255,730.62
153   3,193.22   1,758.15   1,435.07   254,295.55
154   3,193.22   1,748.28   1,444.94   252,850.61
155   3,193.22   1,738.35   1,454.87   251,395.74
156   3,193.22   1,728.35   1,464.87   249,930.87
157   3,193.22   1,718.27   1,474.95   248,455.92
158   3,193.22   1,708.13   1,485.09   246,970.83
159   3,193.22   1,697.92   1,495.30   245,475.53
160   3,193.22   1,687.64   1,505.58   243,969.95
161   3,193.22   1,677.29   1,515.93   242,454.02
162   3,193.22   1,666.87   1,526.35   240,927.67
163   3,193.22   1,656.38   1,536.84   239,390.83
164   3,193.22   1,645.81   1,547.41   237,843.42
165   3,193.22   1,635.17   1,558.05   236,285.37
166   3,193.22   1,624.46   1,568.76   234,716.61
167   3,193.22   1,613.68   1,579.54   233,137.07
168   3,193.22   1,602.82   1,590.40   231,546.67
169   3,193.22   1,591.88   1,601.34   229,945.33
170   3,193.22   1,580.87   1,612.35   228,332.98
171   3,193.22   1,569.79   1,623.43   226,709.55
172   3,193.22   1,558.63   1,634.59   225,074.96
173   3,193.22   1,547.39   1,645.83   223,429.13
174   3,193.22   1,536.08   1,657.14   221,771.99
175   3,193.22   1,524.68   1,668.54   220,103.45
176   3,193.22   1,513.21   1,680.01   218,423.44
177   3,193.22   1,501.66   1,691.56   216,731.88
178   3,193.22   1,490.03   1,703.19   215,028.69
179   3,193.22   1,478.32   1,714.90   213,313.79
180   3,193.22   1,466.53   1,726.69   211,587.10
181   3,193.22   1,454.66   1,738.56   209,848.54
182   3,193.22   1,442.71   1,750.51   208,098.03
183   3,193.22   1,430.67   1,762.55   206,335.48
184   3,193.22   1,418.56   1,774.66   204,560.82
185   3,193.22   1,406.36   1,786.86   202,773.96
186   3,193.22   1,394.07   1,799.15   200,974.81
187   3,193.22   1,381.70   1,811.52   199,163.29
188   3,193.22   1,369.25   1,823.97   197,339.32
189   3,193.22   1,356.71   1,836.51   195,502.81
190   3,193.22   1,344.08   1,849.14   193,653.67
191   3,193.22   1,331.37   1,861.85   191,791.82
192   3,193.22   1,318.57   1,874.65   189,917.17
193   3,193.22   1,305.68   1,887.54   188,029.63
194   3,193.22   1,292.70   1,900.52   186,129.11
195   3,193.22   1,279.64   1,913.58   184,215.53
196   3,193.22   1,266.48   1,926.74   182,288.79
197   3,193.22   1,253.24   1,939.98   180,348.81
198   3,193.22   1,239.90   1,953.32   178,395.49
199   3,193.22   1,226.47   1,966.75   176,428.74
200   3,193.22   1,212.95   1,980.27   174,448.47
201   3,193.22   1,199.33   1,993.89   172,454.58
202   3,193.22   1,185.63   2,007.59   170,446.99
203   3,193.22   1,171.82   2,021.40   168,425.59
204   3,193.22   1,157.93   2,035.29   166,390.30
205   3,193.22   1,143.93   2,049.29   164,341.01
206   3,193.22   1,129.84   2,063.38   162,277.63
207   3,193.22   1,115.66   2,077.56   160,200.07
208   3,193.22   1,101.38   2,091.84   158,108.23
209   3,193.22   1,086.99   2,106.23   156,002.00
210   3,193.22   1,072.51   2,120.71   153,881.29
211   3,193.22   1,057.93   2,135.29   151,746.00
212   3,193.22   1,043.25   2,149.97   149,596.03
213   3,193.22   1,028.47   2,164.75   147,431.28
214   3,193.22   1,013.59   2,179.63   145,251.65
215   3,193.22     998.61   2,194.61   143,057.04
216   3,193.22     983.52   2,209.70   140,847.34
217   3,193.22     968.33   2,224.89   138,622.45
218   3,193.22     953.03   2,240.19   136,382.26
219   3,193.22     937.63   2,255.59   134,126.67
220   3,193.22     922.12   2,271.10   131,855.57
221   3,193.22     906.51   2,286.71   129,568.86
222   3,193.22     890.79   2,302.43   127,266.43
223   3,193.22     874.96   2,318.26   124,948.17
224   3,193.22     859.02   2,334.20   122,613.97
225   3,193.22     842.97   2,350.25   120,263.72
226   3,193.22     826.81   2,366.41   117,897.31
227   3,193.22     810.54   2,382.68   115,514.63
228   3,193.22     794.16   2,399.06   113,115.57
229   3,193.22     777.67   2,415.55   110,700.02
230   3,193.22     761.06   2,432.16   108,267.86
231   3,193.22     744.34   2,448.88   105,818.98
232   3,193.22     727.51   2,465.71   103,353.27
233   3,193.22     710.55   2,482.67   100,870.60
234   3,193.22     693.49   2,499.73    98,370.87
235   3,193.22     676.30   2,516.92    95,853.95
236   3,193.22     659.00   2,534.22    93,319.73
237   3,193.22     641.57   2,551.65    90,768.08
238   3,193.22     624.03   2,569.19    88,198.89
239   3,193.22     606.37   2,586.85    85,612.04
240   3,193.22     588.58   2,604.64    83,007.40
241   3,193.22     570.68   2,622.54    80,384.86
242   3,193.22     552.65   2,640.57    77,744.29
243   3,193.22     534.49   2,658.73    75,085.56
244   3,193.22     516.21   2,677.01    72,408.55
245   3,193.22   497.81   2,695.41   69,713.14
246   3,193.22   479.28   2,713.94   66,999.20
247   3,193.22   460.62   2,732.60   64,266.60
248   3,193.22   441.83   2,751.39   61,515.21
249   3,193.22   422.92   2,770.30   58,744.91
250   3,193.22   403.87   2,789.35   55,955.56
251   3,193.22   384.69   2,808.53   53,147.03
252   3,193.22   365.39   2,827.83   50,319.20
253   3,193.22   345.94   2,847.28   47,471.92
254   3,193.22   326.37   2,866.85   44,605.07
255   3,193.22   306.66   2,886.56   41,718.51
256   3,193.22   286.81   2,906.41   38,812.10
257   3,193.22   266.83   2,926.39   35,885.71
258   3,193.22   246.71   2,946.51   32,939.20
259   3,193.22   226.46   2,966.76   29,972.44
260   3,193.22   206.06   2,987.16   26,985.28
261   3,193.22   185.52   3,007.70   23,977.58
262   3,193.22   164.85   3,028.37   20,949.21
263   3,193.22   144.03   3,049.19   17,900.02
264   3,193.22   123.06   3,070.16   14,829.86
265   3,193.22   101.96   3,091.26   11,738.60
266   3,193.22    80.70   3,112.52    8,626.08
267   3,193.22    59.30   3,133.92    5,492.16
268   3,193.22    37.76   3,155.46    2,336.70
269   2,352.76    16.06   2,336.70       (0.00)
270        -        -          -           -
271        -        -          -           -
272        -        -          -           -
273        -        -          -           -
274        -        -          -           -
275        -        -          -           -
276        -        -          -           -
277        -        -          -           -
278        -        -          -           -
279        -        -          -           -
280        -        -          -           -
281        -        -          -           -
282        -        -          -           -
283        -        -          -           -
284        -        -          -           -
285        -        -          -           -
286        -        -          -           -
287        -        -          -           -
288        -        -          -           -
289        -        -          -           -
290        -        -          -           -
291        -        -          -           -
292        -        -          -           -
293        -        -          -           -
294        -        -          -           -
295        -        -          -           -
296        -        -          -           -
297   -   -   -   -
298   -   -   -   -
299   -   -   -   -
300   -   -   -   -
301   -   -   -   -
302   -   -   -   -
303   -   -   -   -
304   -   -   -   -
305   -   -   -   -
306   -   -   -   -
307   -   -   -   -
308   -   -   -   -
309   -   -   -   -
310   -   -   -   -
311   -   -   -   -
312   -   -   -   -
313   -   -   -   -
314   -   -   -   -
315   -   -   -   -
316   -   -   -   -
317   -   -   -   -
318   -   -   -   -
319   -   -   -   -
320   -   -   -   -
321   -   -   -   -
322   -   -   -   -
323   -   -   -   -
324   -   -   -   -
325   -   -   -   -
326   -   -   -   -
327   -   -   -   -
328   -   -   -   -
329   -   -   -   -
330   -   -   -   -
331   -   -   -   -
332   -   -   -   -
333   -   -   -   -
334   -   -   -   -
335   -   -   -   -
336   -   -   -   -
337   -   -   -   -
338   -   -   -   -
339   -   -   -   -
340   -   -   -   -
341   -   -   -   -
342   -   -   -   -
343   -   -   -   -
344   -   -   -   -
345   -   -   -   -
346   -   -   -   -
347   -   -   -   -
348   -   -   -   -
349   -   -   -   -
350   -   -   -   -
351   -   -   -   -
352   -   -   -   -
353   -   -   -   -
354   -   -   -   -
355   -   -   -   -
356   -   -   -   -
357   -   -   -   -
358   -   -   -   -
359   -   -   -   -
360   -   -   -   -
Item                 House             Annual Rate                      5.00%
Price                   \$200,000.00    Monthly Rate                0.00416667
Down                          \$0.00    Years                                15
Loan                    \$200,000.00    Months                              180
Points                          0.02   Periods Per Year                     12
PMT                        -1,581.59   Type (0 = End, 1 = Begin)             0

5000

10000

```
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
 views: 1 posted: 9/16/2012 language: Unknown pages: 82