Amortization Schedule

For income tax purposes, you can calculate the principal and interest in each payment. For example, at the end of the first month, the interest paid is 35,000 (0.008750) - 306.25 and the principal paid is 325.00 - 306.25 — 18.75, so that the principal balance for the next month s interest calculation is 34,981.25. Iteration of this procedure (best done on a computer) yields the amortization schedule for the loan. 

These estimates of cost are based on the standardized procedure for estimating saline water conversion costs published by the Office of Saline Water. That procedure includes all costs at today s prices—land, capital investment, interest, operating costs, maintenance, taxes, insurance, and a rather severe 20-year amortization schedule. 

Spreadsheet programs Amortization schedules Payroll design and verification Contracts and invoices... 

Volckman s cost data (Table II) were based on a plant capacity of 2,880,000 gallons per day, an energy cost of 5.2 mills per kw.-hr., a membrane replacement rate of 1 1/3 per year with membranes that cost 0.20 per sq. foot, an amortization period of 15 years at 6.5% interest, and the use of the Free States Geduld electrodialysis presses. The major revisions were in capital cost, type of membranes, and amortization schedule. 

Loans have less uniform terms than bonds, varying widely in their interest dates, amortization schedules, reference indexes, reset dates, maturities, and so on. How their terms are defined affects the analysis of cash flows. 

The full cost-recovery rate for the AP-190L at Cornell, based on a three-year amortization schedule, is 40/hour. Since the previous benchmarks have shown that the AP can run at from 1.5-2.5 times the speed of the IBM 370/168, this yields a cost-comparison of about 80 1 in the Cornell environment. It is important to note that this ratio uses the prime-time 370 rates, and can be reduced by a factor of about 0.4 for overnight turnaround. The comparison may also be substantially less favorable to the AP for a partially-subsidized host computer. However, this is still a dramatic demonstration of the potential cost advantage of carrying out large-scale scientific calculations on such an attached processor. 

Many of the equipment vendors have developed cost of ownership (COO) models, some traceable, at lease in part, to SEMATECH. These COO models may be used to account for all aspects of amortized costs and provide a user with a highly accurate anticipated cost schedule. At a minimum a COO model should include the cost of the system, utilities, facilitization, mean-time-between-failures, mean-time-to-repair, preventative maintenance, personnel, all consumable safety costs (including that of required support equipment), reactant, and substrate costs. Each of these parameters" should be well defined and guaranteed, and the user of such models should precisely understand how up-time, mean-time-to-repair, and other terms are defined. A 90% uptime schedule is useless if the system is routinely defined to be out of service, for maintenance, 25 % of the time. 

The note in figure 13.3 pays a coupon equal to the current 2-year government benchmark plus a fixed spread of 1 percent. It has a legal maturity of six years, but it will mature in three years if, two years from the issue date, 6-month LIBOR stands at 6 percent or below. Amortization takes place on subsequent rate-fixing dates according to the specified schedule. If at any time less than 20 percent of the nominal value remains, the note is canceled. 

In the PAC structure, the uncertainty of principal payments is directed to another class of security, i.e., another tranche in the CMO, known as the companion, or support, class. When prepayment rates are high, companion issues support the main PACs by absorbing any principal prepayments that are in excess of the PAC schedule when the rate falls, the companion amortization is delayed if principal prepayments are not sufflcient to reach the minimum stipulated by the PAC band. Accordingly, when prepayment rates are high, the companions average life shortens when rates are low, their average life lengthens. Within the set of PACs and the set of companions, the principal cash flows can be allotted sequentially, as in the sequential-pay structure. 

Targeted amortization class, or TAG, bonds were created to cater to investors who require prepayment protection but at a higher yield than would be available with a PAC. Essentially, a TAG is a PAC whose band consists of only one standard prepayment rate. Like PACs, TACs amortize principal according to a schedule when the actual prepayment rate accords with this standard and, when the rate moves above it, use the extra principal amounts to pay off companion bonds. They differ from PACs mainly in taking on extra prepayment risk when prepayments fall below the rate required to maintain the payment schedule, extending the issues average life. Because one element of the PAC band is removed, TACs trade at a higher yield. 

For specialized credit card banks, particularly in the United States, the ABS market has become the primary vehicle to fund the substantial volume of unsecured credit loans to consumers. Credit card pools are differentiated from other types of ABS in that loans have no predetermined term. A single obligors credit card debt is often no more than six months, so the structure has to differ from other ABS in that repayment speed needs to be controlled either through scheduled amortization or the inclusion of a revolving period (where principal collections are used to purchase additional receivables). 

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