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The $800 million loan carried a 6% interest rate and had the following repayment of principal...

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Finance

The $800 million loan carried a 6% interest rate and had thefollowing repayment of principal schedule:
Year 1: $132 million
Year 2: $32 million
Year 3: $57 million
Year 4: $82 million
Year 5: $82 million
Year 6: $415 million
What is the present value of the term loan? What would thepresent value be if the compnay had chosen permanent debt insteadof a term loan?

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3.6 Ratings (613 Votes)

Year	Repayment of principal	Beginning balance of loan	Ending balance of loan	Payment of interest	Total payment	PVIF at 6%	PV at 6%
1	$Â Â Â Â Â Â Â Â Â 132.00	$Â Â Â 800.00	$Â Â Â Â Â Â 668.00	$Â Â Â Â Â Â Â Â Â Â 48.00	$Â Â Â Â Â 180.00	0.94340	$Â Â Â Â Â 169.81
2	$Â Â Â Â Â Â Â Â Â Â Â Â 32.00	$Â Â Â 668.00	$Â Â Â Â Â Â 636.00	$Â Â Â Â Â Â Â Â Â Â 40.08	$Â Â Â Â Â Â Â 72.08	0.89000	$Â Â Â Â Â Â Â Â 64.15
3	$Â Â Â Â Â Â Â Â Â Â Â Â 57.00	$Â Â Â 636.00	$Â Â Â Â Â Â 579.00	$Â Â Â Â Â Â Â Â Â Â 38.16	$Â Â Â Â Â Â Â 95.16	0.83962	$Â Â Â Â Â Â Â Â 79.90
4	$Â Â Â Â Â Â Â Â Â Â Â Â 82.00	$Â Â Â 579.00	$Â Â Â Â Â Â 497.00	$Â Â Â Â Â Â Â Â Â Â 34.74	$Â Â Â Â Â 116.74	0.79209	$Â Â Â Â Â Â Â Â 92.47
5	$Â Â Â Â Â Â Â Â Â Â Â Â 82.00	$Â Â Â 497.00	$Â Â Â Â Â Â 415.00	$Â Â Â Â Â Â Â Â Â Â 29.82	$Â Â Â Â Â 111.82	0.74726	$Â Â Â Â Â Â Â Â 83.56
6	$Â Â Â Â Â Â Â Â Â 415.00	$Â Â Â 415.00	$Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â -Â Â	$Â Â Â Â Â Â Â Â Â Â 24.90	$Â Â Â Â Â 439.90	0.70496	$Â Â Â Â Â 310.11
	$Â Â Â Â Â Â Â Â Â 800.00						$Â Â Â Â Â 800.00
Pv of the loan = $800.
PV of the perpetual loan is also $800

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