chapters 4 and 5 book questions Flashcards
Which of the following increases the tenants’ cost of occupying space?
a) Free rent
b) Expenses in a gross lease
c) Percentage rent
d) Allowance for tenant improvements
c) Percentage rent
Which of the following measures is best utilized to compare leasing alternatives?
a) Base rent
b) Minimum rent
c) Average rent
d) Effective rent
d) Effective rent
Depreciation impacts which of the following?
a) Before-tax cash flow
b) Taxable income
c) Cash flow
d) NOI
b) Taxable income
Which of the following is not subtracted when calculating taxable income?
a) Operating expenses
b) Depreciation
c) Interest
d) Principal
d) Principal
A discounted cash flow analysis based on NOI is used to determine which value?
a) Land allocation
b) Asset value
c) Equity value
d) Leverage
b) Asset value
Which of the following is not a method typically used to value commercial property:
a) Comparable property
b) NPV
c) Adjusted NOI/cap rate
d) Multiple of after-tax earnings
b) NPV
Which of the following is not an appraisal method?
a) Sales comparison approach
b) Income capitalization approach
c) Distressed seller approach
d) Cost approach
c) Distressed seller approach
Which of the following is not an approach to property valuation based on income?
a) Gross income multiplier method
b) Discounted present value method
c) Direct capitalization method
d) Future accretion method
d) Future accretion method
What attributes of a property would influence the choice of valuation methods used and the accuracy of the resultant valuation?
I. Future growth in rent
II. Current property occupancy and cost of lease-up
III. Expected changes in major leases
IV. Prospect for overbuilding in the market
a) I, II, III
b) II, IV
c) I, III
d) All of the above
d) All of the above
A terminal or reversion value is:
a) The tendency of property to decline in value over time
b) The tendency of return on investment in any industry to revert to the
average of all industries
c) The resale price of a property at the end of a financial projection
d) Purchase price plus growth less depreciation
c) The resale price of a property at the end of a financial projection
The Return on Equity (ROE) on a levered property investment should be:
a) < or = Return on Assets
b) < or = Yield debt
c) = cap rate
d) > or = Return on Assets
d) > or = Return on Assets
The cost approach to valuation is based on:
a) Historical cost less depreciation
b) Historical cost
c) Replacement cost
d) Replacement cost less depreciation
d) Replacement cost less depreciation
NOI minus debt service equals:
I) Cash flow before taxes
II) Equity dividend
III) DCF
III) NPV
a) I, II
b) III, IV
c) I, III
d) II, IV
a) I, II
In what interest rate environment are terminal value estimates most important?
a) High rate
b) Low rate
c) Declining market fundamentals
d) None of the above
b) Low rate
Which is not a real estate valuation method?
a) DCF
b) Price earnings
c) Comparable sales
d) Capped NOI
b) Price earnings
