GO Classes 2023 | IIITH Mock Test 1 | Question: 54

Answer 1

Let’s divide the problem in terms of cash inflows and outflows. Profit earned=Inflows-Outflows

Initial Inflow=25,00,000

After 1st year:-

1. Inflow=20%of25,00,000=5,00,000
2. Outflow=5,00,000(As he paid off this amount of loan at the end of 1st year)
3. Net gain=Inflow-Outflow=0
4. Loan amount at the end of 1st year= 25,00,000(1.12)=28,00,000
5. Amount after repayment of 5,00,000=23,00,000

As CI is calculated annually, the new amount will be calculated on the outstanding amount after the end of 1st year.

Amount to be paid off at the end of 2nd year=23,00,000(1.12)=2576000

After 2nd year:-

1. Inflow=20% of 25,00,000-5,00,000
2. Outflow=2576000

Overall gain=Initial Inflow+Inflow in 2 yrs – outflow at the end of 2nd year= 25,00,000+5,00,000-2576000= 424000  

 

 answered May 9, 2021 selected Jun 12, 2021 by Pratyush Priyam Kuan