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Repayment of Loans

All loans have to be repaid to the lender, but it is usual for the loan terms to be such as to allow repayment over several years at least 5, and maybe 10. In this case, the outstanding loan will decrease with each year of the plant s lifetime, and the interest payment for each year will fall accordingly. [Pg.298]

Conventionally, the loan interest, paid in any year, is assumed due on the outstanding sum at the start of that year, while any repayment does not take effect until the end of the year. [Pg.298]

For any project, the repayment of the loan must effectively come out of its proceeds over the years, i.e. the total net revenues (cash flow) must be at least as large as the amount borrowed, on top of the other costs of construction, etc. However, the repayment element of the loan is not included in a financial appraisal, because its equivalent in plant cost has already been included in the balance as part of that cost. (An alternative way of looking at this is that the company, in paying back the loan, is just replacing that part of the original cost with an equal but differently sourced sum of money.) [Pg.298]


A positive value of any term in Eq. (9-177) implies an increase in working capital, and a negative value a decrease. For example, the sale of fixed assets such as plant, buildings, land, etc., is a source of cash, and the purchase of fixed assets uses up cash. Similarly, an increase in financial resources in the form of loans and stock and bond issues is a source of cash, and a decrease in financial resources in the form of repayment of loans, retirement of stocks and bonds, and the payment of cash dividends uses up cash. (Note that a stock dividend as opposed to a cash dividend does not use up cash.)... [Pg.851]

Sales/marketing, advertising, insurance, purchase of raw materials and spares and financial matters taxation, budgeting, salaries and all other payments to employees, payments to contractors, vendors, allocation of resources, stakeholders and their interests, equity, preference shares and debentures, repayments of loan instalments to financial institutes and investors. [Pg.14]

The oil company s after-tax share of the profit is then available for repayment of interest on loans, distribution to the shareholders as dividends, or reinvestment on behalf of the shareholders in this or other projects. [Pg.305]

Banks are not in business to take risks. They rent money and do everything they can to insure the return of their principal as well as the interest. Elaborate rating systems have been developed to measure each company s ability to repay its loans. One criterion is the debt to equity ratio. The higher the debt the more risk in a loan, and the higher the interest rate. [Pg.244]

The present value of an annuity that has been established to repay a loan is the amount of money borrowed. From the previous discussion... [Pg.304]

All debt contracts require payment of interest on the loan and repayment of the principal (either at the end of the loan period or amortized over the period of the loan). Interest payments are a fixed cost, and if a company defaults on these payments, then its ability to borrow money will be drastically reduced. Since interest is deducted from earnings, the greater the leverage of the company, the higher the risk to future earnings, and hence to future cash flows and the financial solvency of the company. In the worst case, the company could be declared bankrupt and the assets of the company sold off to repay the debt. Finance managers therefore carefully adjust the amount of debt owed by the company so that the cost of servicing the debt (the interest payments) does not place an excessive burden on the company. [Pg.361]

A project cost of US 1218 million and US 1 = NZ 1.85 have been assumed in the calculation of loan interest and repayments shown in Table 2. [Pg.12]

Capital sources Include credits and loans from banks, stocks, etc., as well as the net cash flow from selling the products. The sinks are the repayment of credits and of different debts, as well dividends to shareholders. [Pg.574]

The second question concerns the repayment of a loan or something equivalent, as mortgage or life insurance. Let s consider the opposite problem what is the capital accumulated by investing regularly an amount R for which an interest rate i is received The accumulated value consists of a series of n regularly payments, called annuity. In an ordinary annuity the payments occur at the end of each period, so it will accumulate interests on ( -1) periods. Thus the partial capital generated by the first payment is 7f(l + 0 . The second payment brings, etc. The lumped sum accumulated... [Pg.579]

The different types of bonds in the European market reflect the different types of issuers and their respective requirements. Some bonds are safer investments than others. The advantage of bonds to an investor is that they represent a fixed source of current income, with an assurance of repayment of the loan on maturity. Bonds issued by developed country governments are deemed to be guaranteed investments in that the final repayment is virtually certain. For a corporate bond, in the event of default of the issuing entity, bondholders rank above shareholders for compensation payments. There is lower risk associated with bonds compared to shares as an investment, and therefore almost invariably a lower return in the long term. [Pg.4]

Interest-only mortgages, where the full balance of the loan has to be repaid at maturity, present a potentially significant payment shock to the borrower. These loans may be linked to a savings or investment product designed to help repay the loan on maturity. Loans without a repayment mechanism rely on the borrower s ability to repay or refinance the loan at the time. These loans are usnally penalised in rating agency analysis of the collateral. [Pg.361]

Following the substitution period, the transaction typically enters the amortisation period, during which principal collected from receivables is passed through to noteholders. This may lead to a degree of variability in the average life of the security if the borrowers repay their loans more quickly or slowly than the modelled prepayment speed used to price the notes. Exhibit 14.10 shows a simplified paydown structure for the FIAT 1 transaction. [Pg.441]

Balloon loans allow borrowers to repay the loan in relatively low monthly instalments followed by a single balloon payment at the end (usually up to 60% of the loan). In general, balloon loans are considered more risky than loans with full repayment under equal instalments due to the high residual value (RV) and the possibility that the borrower may not be able to afford to make the final balloon payment. Balloon loans may offer the borrower a set of options before the final payment is due ... [Pg.444]

A CDO is a bond issued by an SPV that is secured by a pool of debt put by the issuer into a portfolio. As in the ABS, this pool is usually the sole recourse the investors will have for repayment of the notes. The pool may be composed of loans, securities, mortgaged backed securities or other ABSs. [Pg.911]

Because a GPM s initial payments are below the market level for the specified fixed rate, they include little or no repayment of principal. In fact, they may not even cover the amount of interest due. In that case, the interest owed is added to the principal of the loan. The outstanding balance may thus increase during the early years of the mortgage, a process known as negative amortization. The higher payments in the remainder of the mortgage term are designed to pay off the entire balance by maturity. [Pg.248]

Interest paid and repayment of short-term loans and overdrafts... [Pg.579]


See other pages where Repayment of Loans is mentioned: [Pg.298]    [Pg.298]    [Pg.316]    [Pg.245]    [Pg.266]    [Pg.249]    [Pg.39]    [Pg.472]    [Pg.36]    [Pg.129]    [Pg.133]    [Pg.118]    [Pg.35]    [Pg.265]    [Pg.273]    [Pg.245]    [Pg.73]    [Pg.7]    [Pg.21]    [Pg.126]    [Pg.220]    [Pg.270]    [Pg.279]    [Pg.53]    [Pg.249]    [Pg.274]    [Pg.12]    [Pg.135]    [Pg.110]   


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