Calculate monthly deduction of each employee

Reference no: EM132211864

Question - A Pharma company has recently recruited 4 scientists at an average age of 27 and is looking to develop quite a few pharmacological formulations. With a view to retain them the company proposes to offer a housing scheme to them on the following terms and conditions:

1. The number of beneficiaries will be four in number.

2. The total cost of purchasing apartments will be Rs.1 crore.

3. PNBHFL offers an 18 year term @ 9.00% interest and HDFC offers 15 years term @ 8% interest.

4. The company will pay the housing finance company on an EAV basis.

5. A Down payment of 5% of the cost of the apartment has to be made and recoverable from the employee in 24 installments. The upfront payment will be made by the company.

6. In case of availing the loan from HDFC, 50% of the EAV will be recovered from the employee on a monthly basis and in case of availing the loan from PNBHFL 45% will be recovered from the employee. The option of choosing the service rests with the company only.

7. Assume a 6% accrual on the deductions taken from the employee under either option with quarterly compounding.

8. Assume that employee deductions happen on the first day of the month and housing loan payments made by the company happens on the last day of the year.

9. The housing loan is offered on a fixed interest basis and EAV will not change.

10. Assume the individual apartments are of equal value. PVIFA 18, 9= 8.76 PVIFA 15, 8 = 8.56

You are called upon to do the following:

1. Calculate the two EAV options and choose the best one.

2. Calculate monthly deduction of each employee under the two options

3. Calculate the accumulated maturity value per year inclusive of compounded quarterly interest.

4. Calculate the EAV differential borne by the company a. on annual basis b. over the tenor. Hints for developing the solution A. Develop loan amortization tables for 1 person for both loan options B. Deduct the appropriate employer.

Reference no: EM132211864

Questions Cloud

Different kinds of listing agreements brokers : There are different kinds of listing agreements brokers may offer clients. Subagency is a way of having a cooperating broker assist a client.

What growth rate is required for Boeing : Boeing Company (NYSE: BA) has a current stock price of $49.86. If the ROE is 20 percent, what growth rate is required for Boeing to have its current P/B

Describe the conditioning approach in detail : Pay particular attention to the meaning of the terms in each type of conditioning. Classical conditioning terms include: UCS (unconditioned stimulus).

Are the differences in messaging based on sex differences : Are the differences in messaging based on sex differences or gender differences between boys and girls? How so?

Calculate monthly deduction of each employee : The housing loan is offered on a fixed interest basis and EAV will not change. Calculate monthly deduction of each employee under the two options

Even more common as world rapidly becomes globalized : Change is inevitable, and it seems to be even more common as the world rapidly becomes globalized. What are the barriers you might encounter

Examine the financial data for the health care organizations : To make informed decisions and achieve strategic goals, health care leaders must carefully analyze an organization's financial position.

Explain the origins and development of your topic : When selecting two theories, consider whether each theory could: address cultural differences or diversity considerations relevant to your topic.

Determine the mean and variance of a discrete distribution : As the subject heading says, there are two different kinds of variables - discrete and continuous. What are the differences between these two types?

User Account

All Pages