Given the following information, calculate the debt coverage ratio for this investment. Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900, Operating expenses: $51,300, Acquisition Price: $520,000, Debt service: $40,000.

Question

Quizplus · Accepted Answer

Debt coverage ratio is calculated by dividing Net Operating Income (NOI) by Debt Service.

NOI = Potential Gross Income * (1- Vacancy Rate) - Operating Expenses 
NOI = $120,000 * 0.91 - $51,300 
NOI = $68,700

Debt Coverage Ratio = NOI / Debt Service
Debt Coverage Ratio = $68,700 / $40,000 
Debt Coverage Ratio = 1.72

Therefore, the answer is B: 1.45.

Given the Following Information, Calculate the Debt Coverage Ratio for This