Term loan amortization schedule workout. In this workout we have a company case that has been provided to us and what we need to do is figure out how much the bank is willing to lend based on the company case. The first thing we're gonna do is calculate the free cash flow. So I'm gonna take my EBIT. I'm going to back out my taxes, add my D&A. Change in working capital is positive so I'm going to add that. And then CapEx is negative, so I will add that as a negative and I get a free cash flow amount, which I will copy across. The bank has decided that they're only comfortable lending up to about 75% of this. They just would like a margin for error, a cushion. So we are going to apply this 75% to the cash flows to come up with a new free cash flow amount. Now, based on this amount, we can go ahead and calculate the amount of the loan which would be the MPV based on the after tax interest rate and the stream of cash flows in row 13, and that gives us 9079.7. With that amount, we can go ahead and fill in our amortization schedule. Beginning balance equal to the ending amount. Interest anchored times the beginning balance. Interest paid is the opposite of the interest accrued and the principal repayment is going to be the opposite of my free cash flow and the interest paid out which is negative and that shows me what my amortization amount is in year one. If I copy this across to year five, I will see that my loan pays down at the end and my principal repayment amount is the amount that I can expect as the bank in each year. I can determine what that is as a percentage of the original loan by taking that amount, flipping it to a positive and dividing it over the beginning balance of the loan, which I'll anchor. Now if I copy this across, I see that the loan amortization amount changes each year and it does add up to a hundred because of course I am repaying the entire amount by the end of year five. If I look at the company's forecast, we see that they have some initial margin struggling. The margin kind of expands a bit. Perhaps there's a restructuring in place or an acquisition integration, whatever the reason is, we may want to look at that and say, let's give them some early cushion so that they don't fall into default, break any covenants, et cetera. We'll give them some cushion in the cash flow and we'll come up with this alternate amortization schedule here which is just an amount that's sort of based loosely on what we calculated with, again, some cushion. This amount will of course add up to a hundred as well. And the way we apply this is everything is pretty much gonna be the same in terms of the way the schedule works. The difference is is that we're gonna calculate this principal repayment as the opposite of the new amortization schedule times the beginning balance anchored. Interest accrued and the interest paid, that formula's not gonna change because it's only calculated on the beginning balance. I'm gonna take my beginning balance, I will apply the interest rate anchored and in the first year, the interest is not gonna change because we're using the beginning balance. I'll take the negative of that for my interest paid and then I can go ahead and sum these cash flows. Now, if we did this correctly, we should get back to zero by the end of the loan, and we do. The principal repayment, the difference, which I will calculate here, the difference in the amortization amount is simply what has been paid above using strictly the cash flows as the amortization schedule and what our adjusted amount is.

And if we add that up over time, of course it adds up to zero because we will only repay what we originally borrowed. It does give the borrower an early cushion which it then has to make up for later in the term.