QUESTION 1

The appropriate decision rule when calculating the NPV for the equity investor is that if the number is a positive it is a good investment.

1. True
2. False

QUESTION 2

Investors should calculate the profitability of an investment on a before-tax basis, since tax rates differ from investor to investor.

1. True
2. False

QUESTION 3

A lower cap rate means the borrower can expect to make most of their returns on the sale of the property as opposed to a higher cap rate which indicates that the bulk of the returns will be made from the yearly cash flows.

1. True
2. False

QUESTION 4

Calculating the NPV using the WACC produces a yield in terms of a percentage for the equity investor.

1. True
2. False

QUESTION 5

In the valuation of a real estate investment the last cash flow consists of two parts: Cash Flow from Operation plus Cash Flow from Sale.

1. True
2. False

QUESTION 6

To discover the future sales price of an income producing piece of real estate an investor must determine the NOI for the year the property is sold and the going out cap rate.

1. True
2. False

QUESTION 7

The fully indexed rate on an ARM is the margin plus the index

1. True
2. False