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

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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