## Answers

DCR = Debt coverage ratio of loan = 2 , Net operating income = NOI = $50000000

We know that

DCR = NOI / Debt Service

2 = 50000000 / Debt service

Debt service = 50000000 / 2 = $25000000

Hence debt service = Total loan payment for a year = 25000000

Monthly debt service = Debt service for year / 12 = (25000000 / 12)

Period of loan = 25 years = 25 x 12 months = 300 months

Interest rate = 8% per year, monthly rate = interest rate per year / 12 = 8%/12

To find the supportable loan amount, we need to find the present value of monthly debt service for 25 years.

We can find the present value using pv function in excel

Formula to be used in excel: =pv(rate,nper,-pmt)

=pv(8%/12,300,-25000000/12)

**Using pv function in excel ,we get supportable loan or present value of monthly debt service = 269926088.76 = (269926088.76 / 1000000) million = 269.992608876 million**

**which is approximately equal to $270 million.**