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  • Cash Planning Solved

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    Arkam
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    The document compares two options for taking out loans. Option 1 involves a long term loan of $400,000 at 1% interest per month. Option 2 involves taking short term loans of $150,000 in January and February each at 1% interest per month. The document lays out cash flows and discounted cash flows for both options. It determines that the maximum amount that can be repaid to investors under Option 1 is $242,757.01, while under Option 2 it is $442,362.40, making Option 2 the optimal choice.

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    Cash planning solved

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    The document compares two options for taking out loans. Option 1 involves a long term loan of $400,000 at 1% interest per month. Option 2 involves taking short term loans of $150,000 in January and February each at 1% interest per month. The document lays out cash flows and discounted cash flows for both options. It determines that the maximum amount that can be repaid to investors under Option 1 is $242,757.01, while under Option 2 it is $442,362.40, making Option 2 the optimal choice.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    11 views6 pages

    Cash Planning Solved

    Uploaded by

    Arkam
    The document compares two options for taking out loans. Option 1 involves a long term loan of $400,000 at 1% interest per month. Option 2 involves taking short term loans of $150,000 in January and February each at 1% interest per month. The document lays out cash flows and discounted cash flows for both options. It determines that the maximum amount that can be repaid to investors under Option 1 is $242,757.01, while under Option 2 it is $442,362.40, making Option 2 the optimal choice.

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    © All Rights Reserved
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    of 6

    Option 1

    Interest rate is 1 % per month


    Assumed that loan is taken in January
    Loan amount = $400000 Optimal amount to borrow
    Assumed that income is received in beginning of month

    Particulars

    Overall Inflow
    Inflow
    Opening balance
    Loan received in January
    Capital self infused

    Income received
    March
    April

    Interest earned on surplus investment


    February
    March
    April

    Overall Outflow
    Expenditure made
    January
    February

    Interest on loan
    February
    March
    April
    Loan Repaid

    Net inflow/outflow

    Option 2
    Discount rate is 1 % per month
    Assumed that loan taken in January is 150000
    Assumed loan taken in February is 150000
    Assumed that income is received in beginning of month
    Particulars

    Overall Inflow
    Inflow
    Opening balance
    Loan received in January
    Laon received in february
    Capital self infused
    Income received

    March
    April
    Interest earned on surplus investment
    February
    March
    April

    Overall Outflow
    Expenditure made
    January
    February

    Interest on loan
    February
    March
    Loan Repaid
    February
    March
    Net inflow/outflow
    Option 1
    Long term loan
    Discounted Cash Flow Amount January February March April

    250000 338.12 486215.74


    1 400000 400000
    0.99 200000 198020

    0.98 500000 489795.92


    0.971 150000 145520.08

    0.99 250000 1732.67


    0.98 338.1245 1.70
    0.971 486215.7 3305.18

    1 150000 150000
    0.99 450000 445454.55

    0.99 4000 3960


    0.98 4000 3920
    0.971 4000 3884
    0.971 400000 388400

    $ 250,000.00 $ 338.12 $ 486,215.74 $ 242,757.01

    Optimal amount to
    borrow
    Option 2
    Short Term Loan
    Discounted Cash Flow Amount January February March April

    192634.0853432
    1 150000 150000
    0.99 300000 296969.7
    0.99 301800 298751.52

    0.98 500000 490148


    0.971 150000 145588.52

    0.99
    0.98
    0.971 1308.08

    1 150000 150000
    0.99 450000 445454.55

    0.99 1800 1781.8182


    0.98 1800 3636.36

    0.99 150000 148484.85


    0.98 300000 293877.55
    $ - $ - $ 192,634.09 $ 339,530.69
    Total

    400000.00
    198020.00 1980

    489795.92 -10204.08
    145520.08 -4479.918

    1732.67
    1.70
    3305.18

    150000.00
    445454.55 -4545.455

    3960
    Maximum amount that can be
    3920 repaid
    $ 400,164.00
    3884 to the investors
    388400

    $ 242,757.01
    Total

    150000
    296969.70 -3030.303
    298751.52 -3048.485

    490148
    145588.52

    1308.08

    150000
    445454.55 -4545.455

    1781.82 -18.18
    3636.36 -36.36

    148484.85 -1515.152
    293877.55 -6122.449
    $ 339,530.69

    $ 442,362.40 Maximum amount that can be repaid


    to the investors

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