Problem 9

Subject: Annual Cashflow Analysis

A year after buying her car, Anita has been offered a job in Europe. Her car loan is for $15,000 at a 9% annual nominal interest rate paid monthly for 60 months. If she can sell the car for $12,000, how much is her profit after paying off the balance (remaining principal) of the loan?

Known Information
car load at year 0:	$15,000
annual nominal interest rate	9%
payment terms (month)	60
resale value (salvage)	$12,000
monthly interest rate	???
Monthly loan payment	???
Use Excel Table for Analysis

Mon	Loan Balance at beginning of year	Loan Payments (PMT)	Interest on Principal (Load @ beginning or year) x (im)	Remaining Total (Principal) (PMT made) + (new Interest Fee)	Using Excel Formula	If Resale (salvage)	Gain or Loss @ the end of 12th payment if car sold
0
1	$15,000.00	=PMT(i,nper,pv)	$112.50		=FV(i,nper,pmt,pv)	$ -
2						$ -
3						$ -
4						$ -
5						$ -
6						$ -
7						$ -
8						$ -
9						$ -
10						$ -
11						$ -
12						$ 12,000	$
13

Requirement:

Calculate the Monthly Interest Rate: im

Calculate Monthly Load Payment: PMT or A

Find Fv to compare the Salvage Value for Decision Making

Use Excel Formula to solve the problem