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FINN 3265 - Mid-Term Exam Questions And Answers 2024/2025 Update
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FINN 3265 - Mid-Term Exam Questions And Answers 2024/2025 Update
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FINN 3265 - Mid-Term Exam QuestionsAnd Answers 2024/2025 Update
Unlike when estimating market value, when using discounted cash flow (DCF) analysis to estimate
investment value, the projection of yearly ________ is used.
A) Net operating income (NOI)
B) Cash flow
C) Effective gross income (EGI)
D) Operating expenses ANS✔✔ B) Cash Flow
You are offered a contract for a lump sum payment in the amount of $50,000 to be paid 3 years from
now. You want to know how much to pay today for this promise of money in the future, if a 12% annual
return on investment is expected.
What is this promise of future payment worth today?
A) $35,589.01
B) $48,529.51
C) $70,246.40
D) $120,091.56 ANS✔✔ A) $35,589.01
Consider a $1,500,000 fixed-rate loan at 11% interest for 25 years. What is the amount of interest repaid
at the end of the first year of the loan?
A) $12,014.14
B) $14,701.70
C $164,406.26
,D $176,420.35 ANS✔✔ C) $164,406.26
A non-recourse loan is where the investors' risk is limited to their investment in the property.
A) True
B) False ANS✔✔ A) True
What is the loan constant on a fully amortizing 30 year, 8% loan?
A) 7.93%
B) 8.81%
C) 10.02%
D) Not enough information is given to calculate a loan constant ANS✔✔ B) 8.81%
Calculate the Minimum Break-even Point if the gross potential income is $700,000, the annual operating
expenses are $250,000, and the annual debt service payments are $300,000.
A) 78.57%
B) 82.40%
C) 80.88%
D) 72.3% ANS✔✔ A) 78.57%
Of the four common calculations used to measure investment return, which two measures assess return
at one moment in time?
A) Cash-on-cash rate of return ($/$) and value enhancement
B) Cash-on-cash rate of return ($/$) and net present value (NPV)
C) Value enhancement and net present value (NPV)
D) Net present value (NPV) and internal rate of return (IRR) ANS✔✔ A) Cash-on-cash rate of return ($/$)
and value enhancement
, Using Excel or a calculator determine the NPV if the investor's required return is 8%, the purchase price
is $110,000 and the asset will cash flow 10,000 year 1; 11,000 year 2; 12,000 year 3; 13,000 year 4 with a
sale in year four that provides additional cash of $210,000? (hint: not all of the numbers will be within
the parentheses of the NPV formula in Excel)
A) $82,128
B) $69,510
C) $12,128
D) $90,350 ANS✔✔ A) $82,128
One of your tenants rents for $1,500 per month. Five years remain on their lease. The adjacent tenant
wants to expand their operation. They are willing to pay $1,800 per month for the extra space. You
approach the existing tenant, who tells you that they will sell the lease for $13,000. The market discount
rate is 10%. Financially speaking, would you accept the price offered by the existing tenant?
A) No, because the asking price of $13,000 is greater than the present value of these future payments.
B) Yes, because the asking price of $13,000 is less than the present value of these future payments.
C) No, because the asking price of $13,000 is less than the present value of these future payments.
D) Yes, because the asking price of $13,000 is greater than the present value of these future payments.
ANS✔✔ B) Yes, because the asking price of $13,000 is less than the present value of these future
payments.
Calculate effective rent for a lease with monthly rent of $800, a term of 12 months, and 1 month of free
rent.
A) $733.33
B) $751.35
C) $744.33
D) $676.81 ANS✔✔ A) $733.33
Your client is considering purchasing a mixed-use building for $525,000 with a $225,000 down payment
and a 30-year $300,000 mortgage with a 7.5% rate (assume monthly payments). No points or fees will
be charged.
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