11.

Question:

A property produces a first year NOI of $100,000 which is expected to grow by 2% per year. If the property is expected to be s
Student Answer:
1308815
1283152 CORRECT ANSWER NOI 100000
1263158 EX GR 0.02
1257992 sold in 10
teminal cap 0.1
Points Received: (not graded) Exp Sale P $128,315.20

12. Question:
A property that produces a first year NOI of $80,000 is purchased for $750,000. The NOI is expected to increase by 15% in the
Student Answer:
Cash Flows
87433 NOI 80000 80000 80000 80000
Purch 750000
87221 yr6 increas 0.15
sale in yr10 830000
95294 discount rt 0.1
NPV $116,489.69
116490 CORRECT ANSWER

Points Received: (not graded)

13. Question:
A property produces an after tax internal rate of return of 12.24%. If the investor has a marginal tax rate of 31%, what is the be
Student Answer:
after tax irr 0.12
0.08 marg 0.31 .

0.11

0.16
EQ 0.18
0.18 CORRECT ANSWER

Points Received: (not graded)

14. Question:
A small office building is purchased with a loan of $1,200,000 with a balloon mortgage that is due at the end of year 10. Payme
Student Answer:
loan 1,200,000
1200 CORRECT ANSWER points charged 0

480 EQ 1200

0
 800

Points Received: (not graded)

15. Question:
A property that produces an annual NOI of $100,000 was purchased for $1,200,000. Debt service for the year was $95,000 of
Student Answer:

5000 Depreciation 38095

debt serv 93400
6600 NOI 100000

-31495 CORRECT ANSWER EQ 31495

-33095

Points Received: (not graded)

16. Question:
The adjusted basis can defined as:
Student Answer:

original cost + capital improvements

CORRECT
- accumulated
ANSWERdepreciation.

sales price - mortgage balance - sales costs.

sales price - accumulated depreciation.

original cost - mortgage balance - sales costs.

Points Received: (not graded)

17. Question:
A property is sold for $5,100,000 with selling costs of 3% of the sales price. The mortgage balance at the time of sale is $3,600
Student Answer:

1184062
TAB
969840

1347000

1097218 CORRECT ANSWER

Points Received: (not graded)

18. Question:
A property is financed with a 75% loan at 11.5% over 25 years. The property produces an ATIRR on total investment of 7.34%
Student Answer:

Negative leverage exists CORRECT ANSWER

Positive leverage exits

No leverage exists

Can't tell without knowing the ATIRR on equity

Points Received: (not graded)

19. Question:
A property produces an 8.92% ATIRR on the total investment considering a tax rate of 28%. What is the maximum interest rate
Student Answer:

0.12 CORRECT ANSWER

0.11 ATIRR 8.92%

Tax 28%
0.06 EQ 0.12

0.09

Points Received: (not graded)

20. Question:
A lender requires a 1.20 debt coverage ratio as a minimum. If the net operating income of a property is $45,000, what annual a
Student Answer:

$37,500 or higher

$37,500 or lower CORRECT ANSWER

NOI 45000
$54,000 or higher Debt cov 1.2

$54,000 or lower EQ 37500

Points Received: (not graded)

the property is expected to be sold in year 10, what is the expected sale price based on a terminal capitalization rate of 9.5% applied to the

$121,899.44
$128,315.20

pected to increase by 15% in the sixth year when some of the leases turnover. The resale price in year 10 is expected to be $830,000. Wha
830000
92000
80000 92000 92000 92000 92000 922000

l tax rate of 31%, what is the before-tax equivalent yield?

ue at the end of year 10. Payments are based on a 25 year amortization period. If one point was charged, what annual amount can be ded
ice for the year was $95,000 of which $93,400 was interest and the remainder was principal. Annual depreciation is $38,095. What is the ta

nce at the time of sale is $3,600,000. The property was purchased 5 years ago for $4,820,000. Annual depreciation allowances of $153,01

RR on total investment of 7.34% based on a tax rate of 31%. What can be said about the leverage associated with the property?
hat is the maximum interest rate that could be paid on debt without causing the leverage to be negative?

operty is $45,000, what annual amount of debt service would provide the required debt coverage ratio?
rate of 9.5% applied to the eleventh year NOI?

ected to be $830,000. What is the net present value of the property based on a 10-year holding period and a discount rate of 9.5%?

annual amount can be deducted for tax purposes?

n is $38,095. What is the taxable income?

tion allowances of $153,016 have been taken. If the tax rate is 28%, what is the after-tax cash flow from sale of the property?

h the property?
ount rate of 9.5%?
 Data Input Box:
Purchase price $750,000
Resale Price $830,000

BEFORE TAX CASH FLOW FROM OPERATIONS:

Year 0 1 2 3 4
Purchase price
Net Operating Income (NOI) ($750,000)
(from
Ch11_Lease) 80,000 80,000 80,000 80,000
Sales Price $73,059.36 $66,720.88 $60,932.31 $55,645.94
Cash flow ($750,000)

IRR

Discount rate 9.50%

Present Value of Cash flows $866,489.69 $116,489.69

 750
830

92000
5 6

80,000 92,000 92,000 92,000 92,000 922,000

$50,818.21 $53,371 $48,740 $44,512 $40,650 $867,123 830000
 CASH FLOW FROM SALE:
Sale Price (net of portion transferred to lender) 5,100,000 sale cost
Sales costs 153,000 0.03
Mortgage Balance 3,600,000
Before-tax Cash Flow 1,347,000 tax
Participation in Gain
Before-tax cash flow 1,347,000

Sale Price 5,100,000

Sales Costs 153,000 dep
Participation 153016

Original Cost Basis 4,820,000

Accumulated Depreciation 765,080 756,080
Adjusted Basis 4,054,920

Capital Gain 892,080

Tax from Sale 249,782

After-Tax Cash Flow from Sale 1,097,218

 0.28

accum depreciation
765080