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Solve The Following Problems. Show Your Solution
Solve The Following Problems. Show Your Solution
1. CM Company borrowed P2,000,000 from a bank on June 30, 2015. The loan has an annual interest rate of
10% and the principal is payable at the end of every quarter amounting to P250,000. The first quarterly
payment will be on September 30, 2015. Prepare an amortization schedule for 2015 until the loan is fully
paid on June 30, 2017. How much interest expense is incurred in 2015 and 2016 with respect to this loan?
2. Your friend is planning to set up a food stall inside your village. You plan to sell items such as fish balls, squid
balls, instant noodles, soft drinks, etc. Based on your research, you will be needing an initial capital of P50,000.
Your estimate of the net cash flows for the next four years (your investment horizon) are as follows:
Year 1: P20,000
Year 2: P25,000
Year 3: P25,000
Year 4: P30,000
Compute the Net Present Value of the project, Will you pursue this business? Why?
YEAR 1 YEAR 2 YEAR 3 YEAR 4
Outflows: 50,000.00
Initial
Investment
- The Net Present Value (NPV) of the project is P50,000.00 and I will pursue the business because the
intended total of NPV is positive. If the NPV is positive, that means the investment makes sense
financially and the investment adds value for the investor.