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What is borrowing capacity and how is it calculated? Using the following data, calculate the borrowing capacity and the feasible debt ratio for a project
What is borrowing capacity and how is it calculated? Using the following data, calculate the borrowing capacity and the feasible debt ratio for a project which has a capital investment plan of $200 million.
Cost of debt: 6%
Cash flow coverage ratio = 1.5
Ten-year operating cash flows:
Year | Operating cash flows (millions) |
1 | $22.21 |
2 | $24.30 |
3 | $24.43 |
4 | $25.65 |
5 | $27.90 |
6 | $28.31 |
7 | $30.76 |
8 | $31.30 |
9 | $32.93 |
10 | $34.66 |
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