Chp. 29 Quiz - Analyzing Investment Property

Question 1

What is the formula for cash-on-cash return?

Answer 1

Annual before-tax cash flow ÷ total cash invested

Question 2

Which of these factors does not affect net operating income?

Answer 2

Amenities

Question 3

What is the net operating income for a company that has a potential rent income of $23,000, vacancies and collection losses worth $3,100, and operating expenses of $10,200?

Answer 3

$9,700

Question 4

The effective rental income plus any income from other sources is the

Answer 4

Gross operating income.

Question 5

What is the formula for determining taxable income?

Answer 5

NOI – depreciation – mortgage interest

Question 6

If an investor has a before-tax cash flow of $18,000 and a tax liability of $2,500, what is this investor’s after-tax cash flow?

Answer 6

$15,500

Question 7

Investor Grady has a BTCF of $16,000, taxable income of $65,100, and is in a 30% tax bracket. What is Grady’s after tax cash flow?

Answer 7

($3,530)

Question 8

What is the profit that an investor actually receives from income-producing property?

Answer 8

After-tax cash flow

Question 9

A tax shelter is

Answer 9

any investment designed to delay, reduce or avoid income taxes.

Question 10

Which of the following is considered a variable expense?

Answer 10

Utilities

Question 11

To calculate gross operating income, one needs to _________________ gross rental income.

Answer 11

subtract collection losses and add other income to

Question 12

Which of the following is NOT a reason for tenants to be attracted to an area with higher transfer costs?

Answer 12

Below average public schools

Question 13

If a property has a potential income of $120,000, a vacancy loss of $15,000, operating expenses of $52,000, and mortgage expenses of $45,000, what is the net operating income for this property?

Answer 13

$53,000

Question 14

Joe is the investor of a property with a potential income of $30,000. The property has an annual vacancy loss of $2,500 and operating expenses of $12,000. How much net operating income does Joe have for the property?

Answer 14

$15,500

Question 15

What is listed last on the operating statement and is most important to investors?

Answer 15

After-tax cash flow

Question 16

The best starting point for estimating a property’s current operations is by

Answer 16

looking at the property’s recent past operations.

Question 17

If a property has a potential income of $120,000, a vacancy loss of $15,000, operating expenses of $52,000, and mortgage expenses of $45,000, what is the before-tax cash flow for this property?

Answer 17

$8,000

Question 18

Which of the following is a fixed expense?

Answer 18

Maintenance

Question 19

Sue’s NOI is $128,000, and her operating expenses are $26,400. She has mortgage expenses of $55,250 with $48,000 of that being interest. Her property has depreciated $8,500 for the year and is in a 24% tax bracket. What is Sue’s before-tax cash flow?

Answer 19

$72,750