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.
144 145 monthly debt service(pmt) 146 monthly Rate( rate) 147 No of months (nper) 148 Supportable loan (pv) 149 150 151 Calculating supportable loan amount 25000000/12 8%/12 300 PV( 8%/12,300,-25000000/1 PV(rate, nper, pmt, [fvl, [type])
.
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