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  3. the $800 million loan carried a 6% interest rate a

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?

Answer & Explanation Solved by verified expert
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 $          132.00 $    800.00 $       668.00 $           48.00 $      180.00 0.94340 $      169.81
2 $             32.00 $    668.00 $       636.00 $           40.08 $        72.08 0.89000 $         64.15
3 $             57.00 $    636.00 $       579.00 $           38.16 $        95.16 0.83962 $         79.90
4 $             82.00 $    579.00 $       497.00 $           34.74 $      116.74 0.79209 $         92.47
5 $             82.00 $    497.00 $       415.00 $           29.82 $      111.82 0.74726 $         83.56
6 $          415.00 $    415.00 $                 -   $           24.90 $      439.90 0.70496 $      310.11
$          800.00 $      800.00
Pv of the loan = $800.
PV of the perpetual loan is also $800
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