Question 1 Given the following information: Property value Loan = .75 x Property Value Annual Loan Payment (3% annual interest, over 20 years) Item Potential gross income (PGI) Vacancy and collection losses Effective gross income (EGI) Operating expenses Capital Expenditures Net Operating Income Debt Service Before-tax Cash Flow a. Compute the debt coverage ratio (DCR). b. Compute the debt yield ratio (DYR). $ 1,500,000.00 $1,125,000.00 $ 75,617.67 Amount $ 200,000.00 $ 30,000.00 $ 170,000.00 $ 51,000.00 $ 8,500.00 $ 110,500.00 $ 75,617.67 $ 34,882.33 (5 points) (5 points) c. Suppose that the lender sets a DCR of 1.6 instead. What would be the new annual loan payment (debt service) amount? What does this imply about the actual loan amount that the borrower can get with this new DCR, assuming unchanged loan terms? (10 points)

Given the following information: a. Compute the debt coverage ratio (DCR). ( 5 points) b. Compute the debt yield ratio (DYR). ( 5 points) c. Suppose that the lender sets a DCR of 1.6 instead. What would be the new annual loan payment (debt service) amount? What does this imply about the actual loan amount that the borrower can get with this new DCR, assuming unchanged loan terms? (10 points)