Time Value of Money and Basics of Capital BudgetingCase AssignmentPearland Medical Center’s board...

Question

Time Value of Money and Basics of Capital Budgeting

Case Assignment

Pearland Medical Center’s board recently decided to investigate ways to increase revenues. The organization has the benefit of different revenue streams, including patient revenue and returns on investments. Additionally, the Center has just borrowed $1,000,000 on a five-year loan with annual payment term at a 12 percent rate. The first payment will be due one year from now. This assignment has two parts:

Part 1: Amortization Schedule

Construct the amortization schedule for this loan.
How do the interest payment, principal payment, and total payment change when a loan is amortized?

Part 2: Investments

Suppose the board were going to invest in an ordinary annuity requiring a payment of $10,000 over the next five years with an interest rate of 5%. What is the future value of this ordinary annuity investment?
The board is considering other options for investing as well. For example, they want to double their investment of $70,000 over the next 12 years by using conventional securities with a projected return of 6%. Does the present value of the investment indicate that this is possible?
What criteria should you examine in considering annuities? Include the common characteristics of variable annuity and equity-indexed annuity in your response.

Length: 4 pages, excluding title page and references.

Assignment Expectations

Assessment and Grading: Your paper will be assessed based on the performance assessment rubric that is linked within the course. Review it before you begin working on the assignment.

Your submission should meet the guidelines on file format, in-text citations and references, scholarly sources, scholarly writing, and use of direct quotes noted under Module 1 Assignment Expectations.

I need 4 pages, APA, 4-5 in-text citations, 4-5 references

tae_636681411939175320_119831_1.docx

Aarti J · Accepted Answer

Time value and basics of capital budgeting
Course Name
Course Date
Student’s Name
Time value and basics of capital budgeting
Amortization Schedule
The loan amount borrowed by the company is 1000000. The loan amount needs to be paid off in five years and will have the rate of 12%. 
For preparing the amortization table first we need to calculate the annuity payment or the loan payments that has to be made yearly.
For calculating the annuity payments:
P = r(PV) / (1-(1+r)^-n)
Where, 
P = Annuity payments
R = Rate
PV = Present value of the loan
N = Number of years
P = 12%(1000000) / (1-(1+12%)^-n)
Solving for annuity payment,
P = 277409.73
Using, the excel formula to calculate the yearly payments:
= pmt (rate,nper,pv)
= pmt (12%, 5, 1000000)
= 277409.73
Amortization Table
	Year
	Payment
	Interest
	Principal
	Balance
	0
	
	
	
	 $ 10,00,000.00 
	1
	 $ 2,77,409.73 
	 $ 1,20,000.00 
	 $ 1,57,409.73 
	 $   8,42,590.27 
	2
	 $ 2,77,409.73 
	 $ 1,01,110.83 
	 $ 1,76,298.90 
	 $   6,66,291.37 
	3
	 $ 2,77,409.73 
	 $    79,954.96 
	 $ 1,97,454.77 
	 $   4,68,836.60 
	4
	 $ 2,77,409.73 
	 $    56,260.39 
	 $ 2,21,149.34 
	 $   2,47,687.26 
	5
	 $ 2,77,409.73 
	 $    29,722.47 
	 $ 2,47,687.26 
	 $                  -   
How do the interest payment, principal payment, and total payment change when a loan is amortized?

Time Value of Money and Basics of Capital Budgeting Case Assignment Pearland Medical Center’s board recently decided to investigate ways to increase revenues. The organization has the benefit of...