Amortising Repayment and Interest Coverage/Cost Allocation | Debt Financing

When working on a case study with very little information given, the following questions occured.

1) When calculating the interest coverage ratio, how do I treat amortising loans? If they yield 0.75% should I treat 0.75% of the notional value as interest expense although that is technically wrong? Do I include the "amortising part" when calculating interest coverage? (No debt schedule given)

2) Apart from that, if I know that costs for a project are $100mm for renovating the office, employing more people, etc., how do I estimate which amount to capitalize and how much to treat as costs? According to my accounting knowledge, payments regarding the office can be capitalised while marketing costs etc. cannot. However, it is impossible to assume how much is spent on the office itself. Furthermore, I do not know when these cash outflows will be occurring apart from that it will be within three years.

3) Is it reasonable to assume that payments are 30, 40, 30, in years 1, 2 and 3 respectively? (Since most costs might occur in the beginning but year one has already started)

4) In terms of the maintenance covenants put in place by a bank would it make a difference if the amount is e.g. 100mm or 150mm? Otherwise it would not make any sense to take use of a private placement with more relaxed/flexible covenants or a public bond with concurrence covenants, assuming the bank loan would yield less.

Thank you very much in advance for any input!

1 Comments
 

Sint facere totam esse aut quam. Illum qui illum voluptate velit.

Repellat in ut atque et. Quos consequatur doloremque eum quae ea.

Voluptas sit tempora aliquam aut sapiente qui id. Provident iure libero accusantium corrupti quia commodi quis.

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Career Advancement Opportunities

July 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • JPMorgan 01 98.3%
  • Guggenheim Partners 01 97.7%
  • Morgan Stanley 07 97.1%

Overall Employee Satisfaction

July 2026 Investment Banking

  • Moelis & Company No 99.4%
  • Evercore No 98.8%
  • Morgan Stanley 01 98.3%
  • BMO Capital Markets 13 97.7%
  • Banco Santander 01 97.1%

Professional Growth Opportunities

July 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • Morgan Stanley 06 98.3%
  • Goldman Sachs 01 97.7%
  • JPMorgan 01 97.1%

Total Avg Compensation

July 2026 Investment Banking

  • Vice President (15) $434
  • Associates (46) $258
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (22) $179
  • Intern/Summer Associate (13) $156
  • 1st Year Analyst (80) $150
  • Intern/Summer Analyst (73) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”