1. Before determining the treatment of capital expenditures in the calculation of NOI, it is important to distinguish these costs from Operating Expenses. In contrast to operating expenses, capital expenditures:

a. add to the market value of the property. b. are deductible for tax purposes in the year in which they are paid. c. are necessary to keep the property operating and competitive in its local market. d. may include minor repairs that do not add to the propertys useful life.

2. The main key to meaningful valuations in real estate is to use defensible cash flow estimates. Which of the following statements is not true in regard to generating accurate cash flow estimates:

a. Investors should include only those sources of income and expenses that related directly to the income producing ability of the property. b. Investors should only consider recent events, rather than long-term trends when evaluation revenue and expense items. c. Investors should obtain information about comparable properties whenever possible. d. Investors should take into consideration local zoning, land use, and environmental controls that may impact the future flow of funds.

3. When determining a propertys before-tax cash flow from operations (BTCF) and net operating income (NOI), it is important to understand how each accounts for the use of financial leverage in its calculation. Which of the following statements is true in regard to how these two measures account for the use of financial leverage?

a. BTCF and NOI are both leverage cash flows. b. BTCF is an unleveraged cash flow, while NOI is a leveraged cash flow. c. BTCF is a leveraged cash flow, while NOI is an unleveraged cash flow. d. BTCF and NOI are both unleveraged cash flows.

4. Income multipliers, profitability ratios, and financial risk ratios can be used to provide a quick assessment of a propertys relative value. Which of the following ratios measures the overall income-producing ability of the property?

a. Operating expense ratio b. Capitalization rate c. Debt coverage ratio d. Equity dividend rate

5. Single year return measures and ratios can be categorized into three groups: profitability ratios, multipliers, and financial ratios. All of the following are considered financial ratios EXCEPT:

a. Capitalization ratio b. Operating Expenses ratio c. Loan-to-value ratio d. Debt yield ratio