What is the debt coverage ratio and debt yield ratio

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You are considering purchasing a small income producing property. You have constructed an income statement and want to analyze it for potential acquisition. The property has NOI of $2,448,000. You estimate value of $40,800,000 and will make at offer of that amount. To pay for the property, you are considering taking out a loan of $26,520,000 which would have annual debt service of $1,704,000.

1. What is the Debt Coverage Ratio? Show how you calculated this. Is it an acceptable ratio to a bank? Why or why not?

2. What is the Debt Yield Ratio? Show how you calculated this. Is it an acceptable ratio to a bank? Why or why not?

3. What is the cap rate? Show how you calculated this.

4. What is the Loan to Value ratio? Show how you calculated this. Is it an acceptable ratio to a bank? Why or why not?

Reference no: EM131566264

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