QUESTION 10

1. To overcome the potential shortcomings of single-year decision making metrics, many investors in real estate also perform multiyear discounted cash flow (DCF) valuation. DCF valuation differs from the single-year ratio analysis in all of the following ways EXCEPT:
2. A.Only with DCF must the investor estimate an appropriate investment horizon accounting for how long they will hold the property.
3. B.Only with DCF must the investor select the appropriate yield at which to discount all expected future cash flows.
4. C.Only with DCF must the investor make explicit forecasts of the property's net operating income for each year in the expected holding period.
5. D.Only with DCF must the investor use a defensible cash flow estimate that incorporates appropriate measures of income and expenses,comparable properties and social/legal environment conditions

0.5 points

QUESTION 11

1. Calculate the Gross Sale Price assuming a property is sold at the end of year five if the following information is known: Year 1 NOI = $102,500, Year 6 NOI= $134,500, Going in cap rate = 9.5%, and Going out cap rate= 8.5%:
2. A.$1,582,353
3. B.$1,415,789
4. C.$1,398,971
5. D.$1,187,986

1 points

QUESTION 12

1. According to lenders, the Debt Service Coverage Ratio for a construction loan should be:
2. A.Usually below 1but not below .5
3. B.Equal to 1
4. C.Almost always above 1and generally below 1.1since it is the least risky type of loan provided
5. D.Usually above 1.4depending on how risky the market is perceived to be

1 points

QUESTION 13

1. Questions 13-30will use the assumptions as explained below:
2. Purchase$45,000,000 Office space - Max 60% LTV loan
3. DSCR requirement: 1.3- Debt Yield Ratio must be above 10%
4. PGI: 15% of acquisition price. Increases at 2% a year for entire hold period
5. Vacancy: 18% and decreases to 10% yr 2-5
6. CAPEX: 7% for entire hold period
7. OPEX: 35% of EGI
8. WACC: 9.5% - Reinvestment Rate: 13%
9. Mortgage Rate: 5.25%5/1 ARM - Mortgage Term: 20 yr.
10. Closing costs: 2% of L/A- Future Selling costs: 4%
11. Going in Market Cap rate is 6.48. Going out CAP rate is 6.48
12. 5 Year Hold- Tax rate 20%
13. Investor requires a Before Tax IRR of 19%
14. What is the Before TaxIRR?
17. A.18.33%
18. B.19.46%
19. C.17.82%
20. D.13.76%

1 points

QUESTION 14

1. Questions13-30will use the assumptions as explained below:
2. Purchase$45,000,000Officespace-Max60%LTVloan
3. DSCRrequirement:1.3-Debt Yield Ratio must be above10%
4. PGI:15%of acquisition price.Increases at2% a year for entire hold period
5. Vacancy:18%and decreases to10%yr2-5
6. CAPEX:7%for entire hold period
7. OPEX:35%of EGI
8. WACC:9.5%-ReinvestmentRate:13%
9. MortgageRate:5.25%5/1ARM-MortgageTerm:20yr.
10. Closing costs:2%of L/A-Future Selling costs:4%
11. Going in Market Cap rate is6.48.Going out CAP rate is6.48
12. 5 Year Hold- Tax rate20%
13. Investor requires a Before TaxIRR of19%
14. What is the DSCR?
15. A.1.25
16. B.1.47
17. C.1.51
18. D.1.15

1 points

QUESTION 15

1. Questions13-30will use the assumptions as explained below:
2. Purchase$45,000,000Officespace-Max60%LTVloan
3. DSCRrequirement:1.3-Debt Yield Ratio must be above10%
4. PGI:15%of acquisition price.Increases at2% a year for entire hold period
5. Vacancy:18%and decreases to10%yr2-5
6. CAPEX:7%for entire hold period
7. OPEX:35%of EGI
8. WACC:9.5%-ReinvestmentRate:13%
9. MortgageRate:5.25%5/1ARM-MortgageTerm:20yr.
10. Closing costs:2%of L/A-Future Selling costs:4%
11. Going in Market Cap rate is6.48.Going out CAP rate is6.48
12. 5 Year Hold- Tax rate20%
13. Investor requires a Before TaxIRR of19%
14. What is the loan balance after 60months?
15. A.$22,632,537
16. B.$23,475,987
17. C.$21,671,927
18. D.$21,988,172

1 points

QUESTION 16

1. Questions13-30will use the assumptions as explained below:
2. Purchase$45,000,000Officespace-Max60%LTVloan
3. DSCRrequirement:1.3-Debt Yield Ratio must be above10%
4. PGI:15%of acquisition price.Increases at2% a year for entire hold period
5. Vacancy:18%and decreases to10%yr2-5
6. CAPEX:7%for entire hold period
7. OPEX:35%of EGI
8. WACC:9.5%-ReinvestmentRate:13%
9. MortgageRate:5.25%5/1ARM-MortgageTerm:20yr.
10. Closing costs:2%of L/A-Future Selling costs:4%
11. Going in Market Cap rate is6.48.Going out CAP rate is6.48
12. 5 Year Hold- Tax rate20%
13. Investor requires a Before TaxIRR of19%
14. What is the projected future sales price in year 5?
16. A.$52,845,916
17. B.$60,034,394
18. C.$70,128,288
19. D.$62,827,922

1 points

QUESTION 17

1. Questions13-30will use the assumptions as explained below:
2. Purchase$45,000,000Officespace-Max60%LTVloan
3. DSCRrequirement:1.3-Debt Yield Ratio must be above10%
4. PGI:15%of acquisition price.Increases at2% a year for entire hold period
5. Vacancy:18%and decreases to10%yr2-5
6. CAPEX:7%for entire hold period
7. OPEX:35%of EGI
8. WACC:9.5%-ReinvestmentRate:13%
9. MortgageRate:5.25%5/1ARM-MortgageTerm:20yr.
10. Closing costs:2%of L/A-Future Selling costs:4%
11. Going in Market Cap rate is6.48.Going out CAP rate is6.48
12. 5 Year Hold- Tax rate20%
13. Investor requires a Before TaxIRR of19%
14. What is the NPV for the equity investor based on BTCF and BTER?
15. A.+$7,126,190. Good investment for the firm
16. B.+4,166,028. Good investment for the firm
17. C.- $1,277,227. Bad investment for the firm
18. D.+$2,188,102.Bad investment for the firm

1 points

QUESTION 18

1. Questions13-30will use the assumptions as explained below:
2. Purchase$45,000,000Officespace-Max60%LTVloan
3. DSCRrequirement:1.3-Debt Yield Ratio must be above10%
4. PGI:15%of acquisition price.Increases at2% a year for entire hold period
5. Vacancy:18%and decreases to10%yr2-5
6. CAPEX:7%for entire hold period
7. OPEX:35%of EGI
8. WACC:9.5%-ReinvestmentRate:13%
9. MortgageRate:5.25%5/1ARM-MortgageTerm:20yr.
10. Closing costs:2%of L/A-Future Selling costs:4%
11. Going in Market Cap rate is6.48.Going out CAP rate is6.48
12. 5 Year Hold- Tax rate20%
13. Investor requires a Before TaxIRR of19%
14. Does the investmenthave favorable leverage?
15. A.Yes,because the IRR is higher than the WACC
16. B.No,because the NPV is negative
17. C.Yes,because theNPV is positive
18. D.Yes,because the IRR is higher than the mortgage interest rate

1 points

QUESTION 19

1. What is the Equity dividend rate?
2. A.5.54%
3. B.3.23%
4. C.6.14%
5. D.5.15%

1 points

QUESTION 20

1. What is the After Tax IRR?
2. A.14.52%
3. B.13.73%
4. C.16.54%
5. D.15.25%

1 points

QUESTION 21

1. What would the Before Tax MIRR be if PGI didn't increase at all during the 5year hold period?
2. A.13.25%
3. B.17.25%
4. C.14.58%
5. D.15.28%

1 points

QUESTION 22

1. In addition to PGI not increasing over the 5year hold period,what would the NPV be if OPEX were 40%?
2. A.-$390,998
3. B.+389,003
4. C.-$279,480
5. D.+1,288,309

1 points

QUESTION 23

1. ASSUMING NO SENSITIVITY ANALYSIS CHANGES,what is DCF valuation of the building at time of purchase?
2. A.$50,354,981
3. B.$45,987,118
4. C.$48,918,991
5. D.$43,884,112

1 points

QUESTION 24

1. What would the value of the building be if the Market Effective Gross Income Multiplier was 7.8?
2. A.$46,248,247
3. B.$43,173,000
4. C.$49.254,247
5. D.$46,248,982

1 points

QUESTION 25

1. As a completely separate sensitivity analysis, what would theBefore Tax IRR be if the interest rate was 3.25% and the term was 30 years?
2. A.23.45%
3. B.19.87%
4. C.21.98%
5. D.28.92%

1 points

QUESTION 26

1. Considering the sensitivity analysis change in #25, what would the NIM be?
2. A.13.2
3. B.15.8
4. C.12.4
5. D.14

1 points

QUESTION 27

1. Considering the sensitivity changes in #25 and #26, what would the DCF valuation be if the WACC was 7%?
2. A.$52,967,121
3. B.$55,795,248
4. C.$49,725,298
5. D.$51,188,288

1 points

QUESTION 28

1. As a separate analysis,if the initial interest rate of 5.25%adjusted after 3years and had a margin of2 and CAPS of 2/3/6, what would the new rate in year 4 be if the index is 4% at the time of adjustment?
2. A.6.25%
3. B.7.25%
4. C.6%
5. D.8%

1 points

QUESTION 29

1. What would the appraised valuation be if the Direct Capitalization valuation came in at $50million, the Sales Approach Valuation came in at $45million and the DCF Valuation came in at $55millionand they were weighed at 33%each in the reconciliation process?
2. A.$47.5 million
3. B.$52,5 million
4. C.$48 million
5. D.$50 million

1 points

QUESTION 30

1. If the Going Out Cap Rate islower than the Going In Cap Rate,the value will usually...
2. A.Be lower
3. B.Be higher but it would depend on other variables
4. C.Be lower but it would depend on other variables
5. D.Be the same