A project with a debt of $2,000 million at 12% interest rate, is expected to repay the debt’s principal in equal instalments over a period of 5 years. The SPV is projected to earn operating revenue of $3,000 million in year 5 of its operation. The following are the corresponding  operating costs: Raw materials and operating costs  - $1,000 million O & M contract fees - $500 million Insurance costs - $450 million Taxes - $650 million Calculate Annual Debt Service Cover Ratio for year 5 and comment on your answer ).

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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A project with a debt of $2,000 million at 12% interest rate, is expected to repay the debt’s principal in equal instalments over a period of 5 years. The SPV is projected to earn operating revenue of $3,000 million in year 5 of its operation. The following are the corresponding  operating costs:

  • Raw materials and operating costs  - $1,000 million
  • O & M contract fees - $500 million
  • Insurance costs - $450 million
  • Taxes - $650 million
  • Calculate Annual Debt Service Cover Ratio for year 5 and comment on your answer ). 
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