CS Professional · Strategic Management and Corporate Finance · Project Evaluation
Sunrise Roads Ltd. has a project with annual cash flow available for debt service (CFADS) of Rs 15 crore. Annual debt service (principal plus interest) is Rs 12 crore. What is the Debt Service Coverage Ratio (DSCR)?
DSCR is cash flow available for debt service divided by total debt service, so 15 crore divided by 12 crore gives 1.25. A value above 1 shows the project generates more than enough cash to meet its principal and interest obligations.
- A0.80
- B1.25Correct
- C1.80
- D3.00
Explanation
DSCR = CFADS / debt service = 15 / 12 = 1.25. The 0.80 option inverts the ratio, which is a wrong base. Check: 12 x 1.25 = 15.
Did you get it right without looking?
One question tells you little. A timed set on Project Evaluation shows your real accuracy, how long you take and where you lose marks.
More Project Evaluation questions
- A project needs Rs 100 crore, funded by Rs 70 crore debt and Rs 30 crore equity. The sponsor's equity is Rs 30 crore. Lenders insist the deb…
- Aarav Textiles is evaluating a machine costing Rs 10,00,000 with cash inflows of Rs 2,00,000 in year 1, Rs 3,00,000 in year 2, Rs 4,00,000 i…
- Sundaram Textiles evaluates a project with an initial outlay of Rs 1,00,000 and a single cash inflow after one year. The inflow is Rs 1,40,0…
- A project has an initial outlay of Rs 8,00,000 and the present value of its future cash inflows at the firm's cost of capital is Rs 9,20,000…
- Kaveri Industries has a budget of Rs 100 lakh and faces capital rationing. Indivisible projects: P1 outlay Rs 50 lakh, NPV Rs 15 lakh; P2 ou…
- Verma Agro Ltd invests Rs 2,00,000 in a project that yields cash inflows of Rs 1,10,000 at the end of year 1 and Rs 1,21,000 at the end of y…