1)The Income Multiplier Approach is one example for Direct Capitalization. (2 Points)

True

False

2) Which of the following steps is not necessary for the Discounted Cash Flow Analysis? (4 Points)

Estimate the amount of time an investor plans to hold the real property.

Estimate the replacement costs of the real property.

Estimate the income the real property generates in every year of the holding period.

Estimate the value at which the real property can be sold in the future.

3) How can we calculate the cap rate? (4 Points)

The cap rate does not have to be calculated, it is commonly known and publicly available.

Divide the Sales Price of a comparison property by the comparison property's NOI.

Divide the NOI of a comparison property by the comparison property's Sales Price.

Divide the EGI of a comparison property by the comparison property's Sales Price.

4) What is the NOI? (4 Points)

The expected profit from a real property during its life time.

The expected profit from a real property throughout the time it is owned by the investor.

The expected profit from a real property during the next 12 month.

The expected monthly profit from a real property.

5) You calculated that a building you are currently appraising will need a new elevator within ten years. The building will not be functional without a working elevator in the long-run. The elevator will cost $120,000 and you are planning to set aside 1/10 in each of the upcoming next years. How should this information influence your appraising outcome? (4 Points)

The investment is not leading to an improved value, it should hence lead to an increase of the operational expenses.

The investment aims to prevent a loss in value, it should hence lead to an increase in capital expenditures.

No cash flow will be observed within the next 12 months, it should, therefore, not be included in the calculations.

The need for a new elevator makes the property different from any other property. We can hence not find a comparison and are unable to use the direct capitalization approach.

6) Property A has a NOI of $100,000 and was sold recently for $1,300,000. Property B has a NOI of $95,200 and was sold for $1,350,000, while property C has a NOI of $500,000 and was sold recently for $6,100,000. You want to calculate the overall cap rate and understand that properties A and B are more similar to your property than property C. You are accordingly assigning to C only half of the weight that you are assigning to A and B each. Which cap rate do you use? (8 Points)

7) Your Property has a NOI of $90,000. Please use the cap rate calculated above and estimate the value of your property. (6 Points)

8) An increase in CAPX will lead to an decrease in EGI. (2 Points)

True

False