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    Loan Interest Deduction for Liz Rogers - Amortization Schedule

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    Loan interest deductions

    Liz Rogers just closed a $10,000 business loan that is to be repaid in three equal, annual, end-of-year payments. The interest rate on the loan is 13%. As part of her firm's detailed financial planning, Liz wishes to determine the annual interest deduction attributable to the loan. (Because it is a business loan, the interest portion of each loan payment is tax-deductible to the business.)

    a. Determine the firm's annual loan payment.
    b. Prepare an amortization schedule for the loan.
    c. How much interest expense will Liz's firm have in each of the next 3 years as a result of this loan?

    Please show solution in Excel.

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    Solution Preview

    ** Please see the attached file for the complete solution response **

    a. Determine the firm's annual loan payment.

    The annual loan payment would be such that the present value of payments is equal to the loan
    amount. Use the PMT function to calculate the ...

    Solution Summary

    The solution explains how to prepare a loan amortization schedule, including determining an annual loan payment and interest expenses in an attached Excel file.