Equal Installments 5.

276
1 2 3 4 5
OB 20.00 16.72 13.12 9.16 4.80
Interest @ 10% 2.00 1.67 1.31 0.92 0.48
Payment - 5.28 - 5.28 - 5.28 - 5.28 - 5.28
CB 16.72 13.12 9.16 4.80 0.00

Tax Saved 30% 0.60 0.50 0.39 0.27 0.14

DF @ 10% 0.909 0.826 0.751 0.683 0.621 0.564
DCF 0.55 0.41 0.30 0.19 0.09
PV Tax Saved 1.53

IF Year in Arrears 0.50 0.38 0.27 0.17 0.08

PV Tax Saved 1.39
APV = PV OPERATING CASH FLOWS + PV FINANCING CASH FLOWS

OPERATING CASH FLOWS DISCOUNTED AT 10%

USING CAPM - UNGEARED COST OF EQUITY

YEAR DF 10% DCF

0 Invest - 24,000 1- 24,000
1-10 ACF 3,500 6.145 21,508
10 RV 5,000 0.386 1,930
PV OPERATING CASH FLOWS - 563

FINANCING CASH FLOWS DISCOUNTED AT 8% (Normal Cost of Borrowing)

Issue Cost - Excluding Subidised Loan

Rights Issue -400
Non Sub Loan -50
-450

Tax Saved On Interest Paid

Sub Loan 400
Non Sub 240 Normal Cost = 8% less 2% as stated
Total Interest 640
Tax Saved 192
Annuity 6.71 8% for 10 Years
PV 1,288

Interest saved Post Tax on Sub Loan

Interest saved 80
Post Tax 56
Annuity 6.71
PV 376

APV
Operating Cash Flow - 563
Issue Cost -450
Tax Saved on Interest 1,288
Interest Saved 376
APV 652