Question
A property is expected to generate $450,000 of net operating income over the next 12 months. Discussion with lenders leads to the conclusion that the
A property is expected to generate $450,000 of net operating income over the next 12 months. Discussion with lenders leads to the conclusion that the minimum acceptable debt coverage ratio will be 1.20 and that loan terms will be 5 percent per annum, with 20-year amortization (monthly payments).
a. What is the maximum supportable annual debt service?
b. What size loan does this imply?
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
