Foundations of Financial Management

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FOUNDATIONS OF FINANCIAL MANAGEMENT 6

Foundationsof Financial Management

Foundationsof Financial Management

NetPresent Value of the project (CO 3)

Initialcash outlay, Io= $1,600,000

Costof capital, r = 10%

Presentvalue interest factor, PVIF = (1+0.1)n

Scrapvalue, sv= 10% × 1,600,000 = $160,000

Calculating NPV for the project,

Year

Cash in/(out)

PVIF

PV cash flows

0

-1,600,000

1.0000

-1,600,000

1

380,000

0.9091

345,455

2

390,000

0.8264

322,314

3

400,000

0.7513

300,526

4

410,000

0.6830

280,036

5

420,000

0.6209

260,787

160,000

0.6209

99,347

NPV

8,464

Therefore,the Net Present Value of the Royal Dutch Shipping project is $8,464.The NPV is positive and this implies that the project is profitable(Arnold, 2008).

LoanAmortization Schedule

Loan amount = $1,600,000 Interest rate = 6% payable monthly

PAYMENT

PRINCIPAL

INTEREST

TOTAL INTEREST

BALANCE

Feb. 2016

$17,763.28

$9,763.28

$8,000.00

$8,000.00

$1,590,236.72

Mar. 2016

$17,763.28

$9,812.10

$7,951.18

$15,951.18

$1,580,424.62

April 2016

$17,763.28

$9,861.16

$7,902.12

$23,853.31

$1,570,563.47

May 2016

$17,763.28

$9,910.46

$7,852.82

$31,706.12

$1,560,653.00

June 2016

$17,763.28

$9,960.02

$7,803.27

$39,509.39

$1,550,692.99

July 2016

$17,763.28

$10,009.82

$7,753.46

$47,262.85

$1,540,683.17

Aug. 2016

$17,763.28

$10,059.86

$7,703.42

$54,966.27

$1,530,623.31

Sept. 2016

$17,763.28

$10,110.16

$7,653.12

$62,619.39

$1,520,513.14

Oct. 2016

$17,763.28

$10,160.71

$7,602.57

$70,221.95

$1,510,352.43

Nov. 2016

$17,763.28

$10,211.52

$7,551.76

$77,773.71

$1,500,140.91

Dec. 2016

$17,763.28

$10,262.58

$7,500.70

$85,274.42

$1,489,878.34

Jan. 2017

$17,763.28

$10,313.89

$7,449.39

$92,723.81

$1,479,564.45

Feb. 2017

$17,763.28

$10,365.46

$7,397.82

$100,121.63

$1,469,198.99

Mar. 2017

$17,763.28

$10,417.29

$7,345.99

$107,467.63

$1,458,781.70

April 2017

$17,763.28

$10,469.37

$7,293.91

$114,761.54

$1,448,312.33

May 2017

$17,763.28

$10,521.72

$7,241.56

$122,003.10

$1,437,790.61

June 2017

$17,763.28

$10,574.33

$7,188.95

$129,192.05

$1,427,216.29

July 2017

$17,763.28

$10,627.20

$7,136.08

$136,328.13

$1,416,589.09

Aug. 2017

$17,763.28

$10,680.33

$7,082.95

$143,411.08

$1,405,908.75

Sept. 2017

$17,763.28

$10,733.74

$7,029.54

$150,440.62

$1,395,175.02

Oct. 2017

$17,763.28

$10,787.41

$6,975.88

$157,416.50

$1,384,387.61

Nov. 2017

$17,763.28

$10,841.34

$6,921.94

$164,338.43

$1,373,546.27

Dec. 2017

$17,763.28

$10,895.55

$6,867.73

$171,206.17

$1,362,650.72

Jan. 2018

$17,763.28

$10,950.03

$6,813.25

$178,019.42

$1,351,700.69

Feb. 2018

$17,763.28

$11,004.78

$6,758.50

$184,777.92

$1,340,695.92

Mar. 2018

$17,763.28

$11,059.80

$6,703.48

$191,481.40

$1,329,636.11

April 2018

$17,763.28

$11,115.10

$6,648.18

$198,129.58

$1,318,521.01

May 2018

$17,763.28

$11,170.68

$6,592.61

$204,722.19

$1,307,350.34

June 2018

$17,763.28

$11,226.53

$6,536.75

$211,258.94

$1,296,123.81

July 2018

$17,763.28

$11,282.66

$6,480.62

$217,739.56

$1,284,841.15

Aug. 2018

$17,763.28

$11,339.07

$6,424.21

$224,163.76

$1,273,502.08

Sept. 2018

$17,763.28

$11,395.77

$6,367.51

$230,531.28

$1,262,106.31

Oct. 2018

$17,763.28

$11,452.75

$6,310.53

$236,841.81

$1,250,653.56

Nov. 2018

$17,763.28

$11,510.01

$6,253.27

$243,095.07

$1,239,143.54

Dec. 2018

$17,763.28

$11,567.56

$6,195.72

$249,290.79

$1,227,575.98

Jan. 2019

$17,763.28

$11,625.40

$6,137.88

$255,428.67

$1,215,950.58

Feb. 2019

$17,763.28

$11,683.53

$6,079.75

$261,508.42

$1,204,267.05

Mar. 2019

$17,763.28

$11,741.95

$6,021.34

$267,529.76

$1,192,525.11

April 2019

$17,763.28

$11,800.65

$5,962.63

$273,492.39

$1,180,724.45

May 2019

$17,763.28

$11,859.66

$5,903.62

$279,396.01

$1,168,864.80

June 2019

$17,763.28

$11,918.96

$5,844.32

$285,240.33

$1,156,945.84

July 2019

$17,763.28

$11,978.55

$5,784.73

$291,025.06

$1,144,967.29

Aug. 2019

$17,763.28

$12,038.44

$5,724.84

$296,749.90

$1,132,928.84

Sept. 2019

$17,763.28

$12,098.64

$5,664.64

$302,414.54

$1,120,830.21

Oct. 2019

$17,763.28

$12,159.13

$5,604.15

$308,018.69

$1,108,671.08

Nov. 2019

$17,763.28

$12,219.92

$5,543.36

$313,562.05

$1,096,451.15

Dec. 2019

$17,763.28

$12,281.02

$5,482.26

$319,044.30

$1,084,170.13

Jan. 2020

$17,763.28

$12,342.43

$5,420.85

$324,465.15

$1,071,827.70

Feb. 2020

$17,763.28

$12,404.14

$5,359.14

$329,824.29

$1,059,423.56

Mar. 2020

$17,763.28

$12,466.16

$5,297.12

$335,121.41

$1,046,957.40

April 2020

$17,763.28

$12,528.49

$5,234.79

$340,356.20

$1,034,428.90

May 2020

$17,763.28

$12,591.14

$5,172.14

$345,528.34

$1,021,837.77

June 2020

$17,763.28

$12,654.09

$5,109.19

$350,637.53

$1,009,183.67

July 2020

$17,763.28

$12,717.36

$5,045.92

$355,683.45

$996,466.31

Aug. 2020

$17,763.28

$12,780.95

$4,982.33

$360,665.78

$983,685.36

Sept. 2020

$17,763.28

$12,844.85

$4,918.43

$365,584.21

$970,840.51

Oct. 2020

$17,763.28

$12,909.08

$4,854.20

$370,438.41

$957,931.43

Nov. 2020

$17,763.28

$12,973.62

$4,789.66

$375,228.07

$944,957.81

Dec. 2020

$17,763.28

$13,038.49

$4,724.79

$379,952.86

$931,919.32

Jan. 2021

$17,763.28

$13,103.68

$4,659.60

$384,612.45

$918,815.63

Feb. 2021

$17,763.28

$13,169.20

$4,594.08

$389,206.53

$905,646.43

Mar. 2021

$17,763.28

$13,235.05

$4,528.23

$393,734.76

$892,411.38

April 2021

$17,763.28

$13,301.22

$4,462.06

$398,196.82

$879,110.16

May 2021

$17,763.28

$13,367.73

$4,395.55

$402,592.37

$865,742.43

June 2021

$17,763.28

$13,434.57

$4,328.71

$406,921.08

$852,307.86

July 2021

$17,763.28

$13,501.74

$4,261.54

$411,182.62

$838,806.12

Aug. 2021

$17,763.28

$13,569.25

$4,194.03

$415,376.65

$825,236.87

Sept. 2021

$17,763.28

$13,637.10

$4,126.18

$419,502.84

$811,599.78

Oct. 2021

$17,763.28

$13,705.28

$4,058.00

$423,560.84

$797,894.50

Nov. 2021

$17,763.28

$13,773.81

$3,989.47

$427,550.31

$784,120.69

Dec. 2021

$17,763.28

$13,842.68

$3,920.60

$431,470.91

$770,278.01

Jan. 2022

$17,763.28

$13,911.89

$3,851.39

$435,322.30

$756,366.12

Feb. 2022

$17,763.28

$13,981.45

$3,781.83

$439,104.13

$742,384.67

Mar. 2022

$17,763.28

$14,051.36

$3,711.92

$442,816.06

$728,333.31

April 2022

$17,763.28

$14,121.61

$3,641.67

$446,457.72

$714,211.70

May 2022

$17,763.28

$14,192.22

$3,571.06

$450,028.78

$700,019.48

June 2022

$17,763.28

$14,263.18

$3,500.10

$453,528.88

$685,756.30

July 2022

$17,763.28

$14,334.50

$3,428.78

$456,957.66

$671,421.80

Aug. 2022

$17,763.28

$14,406.17

$3,357.11

$460,314.77

$657,015.63

Sept. 2022

$17,763.28

$14,478.20

$3,285.08

$463,599.85

$642,537.42

Oct. 2022

$17,763.28

$14,550.59

$3,212.69

$466,812.53

$627,986.83

Nov. 2022

$17,763.28

$14,623.35

$3,139.93

$469,952.47

$613,363.48

Dec. 2022

$17,763.28

$14,696.46

$3,066.82

$473,019.29

$598,667.02

Jan. 2023

$17,763.28

$14,769.95

$2,993.34

$476,012.62

$583,897.08

Feb. 2023

$17,763.28

$14,843.79

$2,919.49

$478,932.11

$569,053.28

Mar. 2023

$17,763.28

$14,918.01

$2,845.27

$481,777.37

$554,135.27

April 2023

$17,763.28

$14,992.60

$2,770.68

$484,548.05

$539,142.66

May 2023

$17,763.28

$15,067.57

$2,695.71

$487,243.76

$524,075.10

June 2023

$17,763.28

$15,142.90

$2,620.38

$489,864.14

$508,932.19

July 2023

$17,763.28

$15,218.62

$2,544.66

$492,408.80

$493,713.57

Aug. 2023

$17,763.28

$15,294.71

$2,468.57

$494,877.37

$478,418.86

Sept. 2023

$17,763.28

$15,371.19

$2,392.09

$497,269.46

$463,047.67

Oct. 2023

$17,763.28

$15,448.04

$2,315.24

$499,584.70

$447,599.63

Nov. 2023

$17,763.28

$15,525.28

$2,238.00

$501,822.70

$432,074.35

Dec. 2023

$17,763.28

$15,602.91

$2,160.37

$503,983.07

$416,471.44

Jan. 2024

$17,763.28

$15,680.92

$2,082.36

$506,065.43

$400,790.52

Feb. 2024

$17,763.28

$15,759.33

$2,003.95

$508,069.38

$385,031.19

Mar. 2024

$17,763.28

$15,838.12

$1,925.16

$509,994.54

$369,193.07

April 2024

$17,763.28

$15,917.31

$1,845.97

$511,840.50

$353,275.75

May 2024

$17,763.28

$15,996.90

$1,766.38

$513,606.88

$337,278.85

June 2024

$17,763.28

$16,076.89

$1,686.39

$515,293.27

$321,201.96

July 2024

$17,763.28

$16,157.27

$1,606.01

$516,899.28

$305,044.69

Aug. 2024

$17,763.28

$16,238.06

$1,525.22

$518,424.51

$288,806.64

Sept. 2024

$17,763.28

$16,319.25

$1,444.03

$519,868.54

$272,487.39

Oct. 2024

$17,763.28

$16,400.84

$1,362.44

$521,230.98

$256,086.54

Nov. 2024

$17,763.28

$16,482.85

$1,280.43

$522,511.41

$239,603.70

Dec. 2024

$17,763.28

$16,565.26

$1,198.02

$523,709.43

$223,038.44

Jan. 2025

$17,763.28

$16,648.09

$1,115.19

$524,824.62

$206,390.35

Feb. 2025

$17,763.28

$16,731.33

$1,031.95

$525,856.57

$189,659.02

Mar. 2025

$17,763.28

$16,814.99

$948.30

$526,804.87

$172,844.03

April 2025

$17,763.28

$16,899.06

$864.22

$527,669.09

$155,944.97

May 2025

$17,763.28

$16,983.56

$779.72

$528,448.81

$138,961.42

June 2025

$17,763.28

$17,068.47

$694.81

$529,143.62

$121,892.94

July 2025

$17,763.28

$17,153.82

$609.46

$529,753.08

$104,739.13

Aug. 2025

$17,763.28

$17,239.58

$523.70

$530,276.78

$87,499.54

Sept. 2025

$17,763.28

$17,325.78

$437.50

$530,714.28

$70,173.76

Oct. 2025

$17,763.28

$17,412.41

$350.87

$531,065.15

$52,761.35

Nov. 2025

$17,763.28

$17,499.47

$263.81

$531,328.95

$35,261.88

Dec. 2025

$17,763.28

$17,586.97

$176.31

$531,505.26

$17,674.91

Jan. 2026

$17,763.28

$17,674.91

$88.37

$531,593.64

$0.00

References

ArnoldG. (2008).Corporate financial management 4thedition.Britain: Pearson Education.

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