Question

Your firm recently sold an asset and financed the sale of the asset. The firm took back a $170,000 loan on the equipment sale with monthly payments and 8% interest. The loan was a 5-year loan. Your firm now needs cash and desires to sell the loan. If investors require 12% rate of return to invest in this type of loan and 6 payments have been made on the loan, how much will your firm loose from the sale of this financial asset?

Answer 1

We sold some equipments and proceeds were used to buy a financial assets (Loan) for 170,000. Loan is a monthly payments 8% interest of 5 years.

Now, we need to sell the loan. So we find the present value of loan using the revised interest rate.

We use the financial calculator:

Feed,

PMT = 170000*8% / 12 = 1133.33

N = 60 months - 6 months = 54 months

FV = 170,000

i/Y = 12/12 = 1 (Interest Rate per month)

Compute PV, we get 146,444.42

Hence an asset which was bought for 170,000 can now be sold for 146,444.42 giving us an loss of 23555.58