Messineo LLC borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. Theloan is amortized into three equal annual end of year payments. As the CFO of Messineo, LLCyou must prepare a report (executive summary) of the pertinent information in a short summaryfor the CEO.
1.Calculate the annual end of year loan payment amount.
2.Prepare a loan amortization schedule showing the interest and principal break down ofeach of the three loan payments.
3.Prepare a one page executive summary for the CEO, Linda Messineo,with the loanpayment schedule explaining why the interest portion of each payment declines with thepassage of time.
Also, be sure to remind her that the interest portion of the loan payment is tax deductible. Youshould include your spreadsheet as an appendix to your executive summary to prove your figuresin the loan payment schedule.
Hint:Using a spreadsheet, you will start with the PMT function to calculate the annual payment.Next you will use the IPMT function to find the interest portion for each of the three years.