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REE 3043 Exam Trial questions with answers
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REE 3043 Exam Trial questions with answers
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REE 3043 Exam Trial questions with answersIn discounted cash flow (DCF) analysis, the sale price of the property must be
estimated at the end of the expected holding period. The most common
method for determining the terminal value of the property is the
A. yield capitalization method.
B. direct capitalization method.
C. repeat-sales approach.
D. cost approach. - ✔✔B
Given the following information regarding an income producing property,
determine the NPV using levered cash flows in your analysis: required equity
investment: $270,000; expected NOI for each of the next five years: $150,000;
debt service for each of the next five years: $125,000; expected holding period:
five years; required yield on levered cash flows: 15%; expected sale price at end of
year 5: $2,000,000; expected cost of sale: $125,000; expected mortgage balance
at time of sale: $1,500,000.
A.$245.15
B. $270,245.15
C. $419,264.54
D. $1,435,029.64 - ✔✔A
Determine the net present value (NPV) of an investment decision to purchase a
property for $90,000 that will generate annual cash flows of $10,000 per year for
, eight years and sell for $80,000 at the end of the eight-year holding period, if the
appropriate discount rate is 10%? (Note: assume payments are made at end of
year.)
A. −$2,475
B. −$609
C. +$669.85
D. +$2,475 - ✔✔C
Given the following expected cash flow stream, determine the IRR of the
proposed investment in an income-producing property and determine whether
or not the investment should be pursued using IRR as your decision-making
criteria: investment horizon: five years; expected yearly cash flow in each of the
next five years: $127,628; expected sale price at end of five years: $1,595,350;
required return on equity: 5%; current market price of property: $1,750,000
A. IRR is 4.92%; decision is to invest.
b. IRR is 4.92%; decision is to not invest.
C. IRR is 5.72%; decision is to invest.
D. IRR is 5.72%; decision is to not invest. - ✔✔C
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
A. only with DCF must the investor estimate an appropriate investment
horizon accounting for how long she will hold the property.
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