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      Question

      GH Ltd took a term loan of Rs.24 crore for a period of

      20 years to be repaid in equal annual instalments. The interest is 10% p.a. on reducing balance. The projected Net Operating Income is ₹3 crore and ₹4 crore in the first and second year respectively. What is the Debt Service Coverage Ratio (DSCR) of GH Ltd in second year? 
      A 1.15 Correct Answer Incorrect Answer
      B 2.50 Correct Answer Incorrect Answer
      C 1.67 Correct Answer Incorrect Answer
      D 3.33 Correct Answer Incorrect Answer
      E 0.83 Correct Answer Incorrect Answer

      Solution

      Debt repayment each year = 24 crore/20 years = 1.2 crore Interest in 1st year = 10% of 24 crore = 2.4 crore Interest in 2nd year = 10% of (24-1.2 crore) = 2.28 crore Debt obligation in 2nd year = Debt repayment + Interest = 1.2 + 2.28 = 3.48 crore Net Operating Income in 2nd year = 4 crore DSCR = Net Operating Income / Debt Obligation  = 4/3.48 = 1.15 times

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