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What is EMI and how is it calculated?

   

Added on  2021-04-24

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Running Head: Financial Management 1
What is EMI and how is it calculated?_1
Financial Management 2Question 2:a)The present value has been calculated in the case to identify the total worth of future amount. The calculations explains that if Roger would earn $ 10,000 per annum than the total present value of that amount would be $ 67,100 whereas if the total amount would be got today then it would be $ 1,00,000. Thus, it is recommended to the Rogarto sell his invention today to get the higher worth of the amount.Formula: PV = CF/(1+r)nWhere:CF =cash flowin future periodr = the periodicrate of returnor interest (also called the discount rate or the required rate of return)n = number of periodsCalculation of Present valueYearCash inflowPV factorPV1 $ 10,000 0.92593 $ 9,259.26 2 $ 10,000 0.85734 $ 8,573.39 3 $ 10,000 0.79383 $ 7,938.32 4 $ 10,000 0.73503 $ 7,350.30 5 $ 10,000 0.68058 $ 6,805.83 6 $ 10,000 0.63017 $ 6,301.70 7 $ 10,000 0.58349 $ 5,834.90 8 $ 10,000 0.54027 $ 5,402.69 9 $ 10,000 0.50025 $ 5,002.49 10 $ 10,000 0.46319 $ 4,631.93 Present value = total cash inflow – total cash outflow $ 67,100.81 b)The EMI amount has been calculated in the task. Formula: [P x R x (1+R)^N]/[(1+R)^N-1]
What is EMI and how is it calculated?_2
Financial Management 3Calculation of Monthly payment Net amount after 2 years $ 2,19,670 Tenure (months)160Interest rate monthly0.83%EMI$2,491 If the Debra wants the amount in 160 equal monthly payments, then the total EMI would be $ 2,491. Following is the calculations:c)In the case, effective and nominal rate of firm A and Firm B has been calculated.Formula:Effective rate: r = (1+(i/n)^n - 1Nominal rate: (1+ (R)) = (1+ (r)) / (1+ (i))Calculation of effective rateInterest rate 10.00%Compounding quarterly4EAR10.47%Calculation of Nominal rateInterest rate 10.00%Compounding monthly12EAR9.98%Nominal rate of firm B would be 9.98% (Titman, Keown & Martin, 2017 ).
What is EMI and how is it calculated?_3

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