**HP 12C and HP 11C: Loan Amount Using the Annual Loan Constant**

**Introduction**

The program calculates the theoretical loan amount using the following factors:

* NOI: Net Operating Income. The estimated net operating income the property is expected to earn annually. An average is usually used.

* DCR: Debt Coverage Ratio. The ratio of net operating income to annual debt service, describing a company’s ability to pay its debts. Generally, the larger the DCR, the better. We really don’t want DCR to be below 1.

* Number of payments per year, number of years, and annual interest rate of the potential loan.

The ALC, or the annual loan constant is calculated by:

* Either divided the annual debt service by the loan amount (when the amount is known), or

* Determining the periodic payment to amortize a $100 loan given number of payments and interest rate.

Set up:

Number of payments -> N

Interest Rate -> I%YR (or periodic interest rate -> i)

-100 -> PV

0 -> FV

Solve for PMT

The ALC is expressed as a percentage.

The theoretical loan amount is calculated by:

Loan = NOI / (DCR * ALC%)

**HP 12C Program: Loan Amount Using the Annual Loan Constant**

Instructions:

Store the following:

NOI in R1

DCR in R2

Number of payments per year in R3

Number of periods in [ n ]

Periodic Interest rate in [ i ]

Program:

Step; Key; Code

01; 1; 1

02; 0; 0

03; 0; 0

04; CHS; 16

05; PV; 13

06; 0; 0

07; FV; 15

08; PMT; 14

09; RCL 3; 45, 3

10; *; 20

11; RCL 2; 45, 2

12; x<>y; 34

13; %; 25

14; RCL 1; 45, 1

15; x<>y; 34

16; ÷; 10

17; GTO 00; 43, 33, 00

(* HP 12C Platinum, step 17: GTO 000; 43, 33, 000)

**HP 11C Program: Loan Amount Using the Annual Loan Constant**

Instructions:

Store the following:

NOI in R1

DCR in R2

Number of payments per year in R3

Number of periods in R4

Periodic Interest rate in R5

Program:

Step; Key; Code

001; LBL A; 42, 21, 11

002; 1; 1

003; ENTER; 36

004; ENTER; 36

005; RCL 5; 45, 5

006; %; 43, 14

007; +; 40

008; RCL 4; 45, 4

009; CHS; 16

010; y^x; 14

011; *; 30

012; 1; 1

013; RCL 5; 45, 5

014; %; 43, 14

015; x<>y; 34

016; R↓; 33

017; ÷; 10

018; 1; 1

019; 0; 0

020; 0; 0

021; x<>y; 34

022; ÷; 10

023; RCL 3; 45, 3

024; *; 20

025; RCL 2; 45, 2

026; x<>y; 34

027; %; 43, 14

028; RCL 1; 45, 1

029; x<>y; 34

030; ÷; 10

031; RTN; 43, 32

**Examples**

Example 1:

NOI: $58,000.00

DCR: 1.25

P/Y: 12

Number of Years: 30

Annual Interest Rate: 5%

Loan Amount: $720,288.92

Example 2:

NOI: $40,000.00

DCR: 1.35

P/Y: 12

Number of Years: 20

Annual Interest Rate: 6.8%

Loan Amount: $323,464.95

Source:

Goldman, Mark H. and Stephen D. Messner “HP 12C Real Estate Applications Handbook” Hewlett Packard Rev. B. March 1984

Eddie

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