Solve using excel: A. Given the following information, calculate the debt coverage ratio of this commercial...

Solve using excel:

A. Given the following information, calculate the debt coverage ratio of this commercial loan. Estimated net operating income (NOI) in the first year: $150,000, Debt service in the first year: $100,000, Loan amount: $1,000,000, Purchase price: $1,300,000

B. Given the following information, calculate the loan-to-value ratio of this commercial loan. Estimated net operating income in the first year: $150,000, Debt service in the first year: $100,000, Loan amount: $1,000,000, Purchase price: $1,300,000

C. Given the following information, calculate the debt yield ratio on the following commercial property. Estimated Net Operating Income in the first year: $2,500,000, Debt service in the first year: $960,000, Loan amount: $20,000,000, Purchase price: $27,300,000

Expert Solution

A.

Debt Service Coverage Ratio

It Indicates whether any corporation or concern is generating appropriate income to which can be used pay the debts.
To calculate the ratio all the expenses including interest and other costs such as sinking funds etc are considered.

Estimated NOI	$1,50,000.00
Debt Service In First Year	$1,00,000.00
Loan	$10,00,000.00
Purchase Price	$13,00,000.00

Operating Income	$1,50,000.00
Total Debt Service cost	$1,00,000.00
Operating Income/Total Debt Service cost	1.5
Debt Service Coverage Ratio=Operating Income/ Total Debt Service cost

B.

A loan to value ration is calculated by dividing the loan amount by the appraised market value.

In this case the the calculation is as follows

Estimated NOI	$1,50,000.00
Debt Service In First Year	$1,00,000.00
Loan	$10,00,000.00
Purchase Price	$13,00,000.00

Operating Income	$1,50,000.00
Total Debt Service cost	$1,00,000.00

LTV	0.77

C.

The Loan Yield is calculated to find the cash on return to be enjoyed by the lender. It is calculated by dividing the NOI by the first mortgage. In this case it is calculated as follows

Estimated NOI	$25,00,000.00
Debt Service In First Year	$9,60,000.00
Loan	$2,00,00,000.00
Purchase Price	$2,73,00,000.00

Operating Income	$25,00,000.00
Total Debt Service cost	$9,60,000.00

Loan Yield Ratio= Operating Income/Loan x100	13%

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