Consider a 6

question 11

Multiple Choice

Consider a 6.5% loan amortizing at a 20-year rate with monthly payments. What is the maximum amount that can be loaned on a property whose net operating income NOI) is $1,000,000 per year, if the underwriting criteria specify a debt service coverage ratio DCR) no less than 120%?

• A) $69,444
• B) $8,000,000
• C) $9,314,236
• D) $11,177,084
• E) $13,412,500

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Definitions:

Operating Cash Flow

The cash generated from the normal operating activities of a business in a specific time period.

Net Working Capital

The difference between a company's current assets and current liabilities, used to measure its short-term financial health.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability from its operations, excluding the effects of interest and tax expenses.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the company's ability to meet its short-term obligations.