In this workout, we're going to calculate the debt repayment profile of a loan, assuming a constant debt service coverage ratio. And this is a very common quick way of modeling out our debt forecasts, our debt repayment, and our interest payments. So we're given a forecast of unlevered free cash flows for years 4 through 11. We also have a section here where we're gonna model out our debt repayment profile, and down below we have our assumption of our debt service coverage ratio of 1.8 times. So let's begin by computing our total debt service. I'm gonna take the 200 unlevered free cash flow for year 4, and I'm gonna divide it by 1.8, and that gives me a total debt service of 111.1. And this is basically the most, or all the money I have to pay for interest as well as to repay the principle in year four.

Let's copy this to the right all the way through year 11.

And let's now build out our debt repayment profile. So we start with a debt balance of 800, and that's gonna be my beginning balance in year 4.

I'm gonna skip for now the repayment, and I'm gonna calculate the ending balance as the sum of the beginning balance and the repayment amount.

Now for simplicity, the interest will be based on the beginning balance of debt. So I'll simply take minus 5% times the beginning balance of 800, and that gives us an interest expense or interest payment of 40 in year 4.

Now the repayment, of course, has to be the difference between the total debt service of 111.1 and the 40 interest expense.

So I would just do minus open app parenthesis, take the total debt service and add the interest in order to get that difference between the total debt service and the interest payment. And that would give me 71.1. So of course if you add the repayment of 71.1 plus the interest expense of 40, you get a total debt service of 111.1.

Now we can take all four lines and we can copy them to the right all the way through year 11. And as you can see, the ending balance actually goes down over time. It doesn't get fully paid by the end of year 11, but this is a common method of forecasting the debt repayment profile based on a constant debt service coverage ratio.