ZEMCH 2015 - International Conference Proceedings | Page 109
nancially viable. All the other scenarios can be considered bankable, however different optimal
capital structures are needed according to the different bank requirements.
Graph 1 and Graph 2 provide a better understanding of buildings’ financial scheme and profitability; they plot the values of the dependent variables Rent, NPV and Leverage according to the different combinations of DSCRs and Loan durations. At a glance, the graphs show how increasing
the DSCRpre-taxthe minimum needed income rises and the related financial leverage falls. This
is due to the risk profile of the project: if the lenders consider it a high-risk project they request a
higher yearly income to the borrowers and, consequently, they are less willing to provide funds.
Graph 1: MUCB Sensitivity Analysis
Graph 2: MUGB Sensitivity Analysis
The worst scenario is with DSCRpre-tax equaling to 1.55 and a loan of 20 years; in this case the
borrowers need at least 35% of Equity in their capital structure otherwise they would lack of debt
carrying capacity.
Similar considerations can be done with the profitability analysis. Generally, investors seek to
maximize the financial leverage since the debt capital incurs in a lower cost than the equity. Consequently, it permits the NPV maximization. The data show that the financial leverage is maximized with the lowest DSCRpre-tax and the larger loan period possible.
The choice of the minimum DSCRpre-tax and the duration of the debt are crucial from the lenders
prospective since they are strictly related to the intrinsic risk of the project. Dealing with innova-
Financial Analysis of Green Mock-Up Buildings in Tropical emerging Countries
107