Assume a retail shopping center can be purchased for $5.5 million. The centers first year NOI is

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Question:

Assume a retail shopping center can be purchased for $5.5 million. The center’s first year NOI is expected to be $489,500. A $4,000,000 loan has been requested. The loan carries a 9.25 percent fixed contract rate, amortized monthly over 25 years with a 7-year term. What will be the property’s (annual) debt coverage ratio in the first year of operations?

a. 1.40.

b. 1.19.

c. 0.84.

d. 0.08.