Mu SA has a loan whose only remaining cash flow is a repayment of 1,210,000 in 2 years; its original effective interest rate is 10 %. The parties modify the terms: the only cash flow becomes 1,450,790 in 3 years, and Mu pays 45,000 of fees to the lender and receives 15,000. Pedagogical assumption: a single final cash flow, no coupon. Calculate the present value of the new terms (fees net, original rate), the difference from the present value of the original cash flows and the 10% threshold.
- Original remaining cash flow
- 1,210,000
- Original effective interest rate
- 10 %
- Cash flow under the new terms
- 1,450,790
- Fees paid
- 45,000
- Fees received
- 15,000