Calculate the debt service coverage ratio and comment on it

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Reference no: EM132209100

Question - You are developing a long-term finance pro forma for a venture involving the construction and leasing of a 100 unit apartment complex based on the following conditions:

The 100 units is composed of 70 two-bedroom units and 30 three-bedroom units.
The market rent for a two-bedroom unit is $700 per month and for a three-bedroom unit is $900 per month.
Other monthly income such as coin laundry, vending machine, etc. is $1,500.
Expected vacancy factor is 10%.
Estimated annual expense is 30% of the adjusted gross annual income (the adjusted gross annual income is the income after the vacancy factor is considered)
Cap rate is 9%
Long term debt service interest rate is 8% (annual interest rate)
Loan/value ratio is 70%.

a) Calculate the capitalized value and comment on it.

b) Calculate the debt service coverage ratio and comment on it.

Reference no: EM132209100

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