Module 6 - Solution To Math Exam

MODULE 6 (SOLUTION TO MATH EXAM)
1. If a propertys net income ratio

expense ratio [2]?
[1]
Page 1 of 38
is 0.80, what is the operating
NIR + OER = 1 OER = 1 NIR

= 1 0.80 = 0.20 20%
2. An office building was recently sold for P60M. Given the ff.
information: GPI = 12M, vacancy factor = 10%, expenses = 45% of
EGI, annual mortgage payment = 4.5M, equity = 12.5M; what is the
[3]
[4]
equity dividend rate or cash-on-cash rate of return ?
http://www.biggerpockets.com/articles/1024-how-to-calculate-cash-on-cash-return
1
2
3
4
NET INCOME RATIO (NIR) = NET INCOME GROSS INCOME

OPERATING EXPENSE RATIO (OER) = OPERATING EXPENSE (BEFORE INTEREST & DEPRECIATION) GROSS INCOME
EQUITY DIVIDEND RATE = (NET OPERATING INCOME DEBT SERVICE) EQUITY
CASH-ON-CASH RETURN = BEFORE-TAX CASH FLOW TOTAL CASH INVESTED
Step 1
Step 2
Step 3
Step 4
Less:
=
Less:
=
Less:
=
GROSS POTENTIAL INCOME 12.00

PHYSICAL VACANCY
1.20
EFFECTIVE GROSS INCOME 10.80
OPERATING EXPENSE
4.86
NET OPERATING INCOME
5.94
DEBT SERVICE
4.50
BEFORE-TAX CASH FLOW
1.44
EQUITY 12.50
EQUITY DIVIDEND RATE 0.1152
or
or
CASH-ON-CASH RETURN 11.52%
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Page 3 of 38
3. For the office building above and the same information, what is the
over-all rate of return [5] for the property?
OAR
[6]
= NOI SP
[7]
= 5.94 60 = 0.099 9.90%
4. If the land value in a subdivision has increased by 12% during the

past year and the average price of land sold last year was P1.56M,
What is the average price of land sold today?
FV = SP x FVF
[8]
= 1.56 x (1.12) = 1.7472M
5. A commercial property producing an annual gross income of

P768,500 was sold two months ago for 5.62M, what is the propertys
[9]
gross income multiplier ?
5
6
7
8
9
OVERALL RATE OF RETURN = NET OPERATING INCOME PURCHASE/SELLING PRICE

OVERALL RATE OF RETURN = NOI SELLING PRICE
SELLING PRICE
FUTURE VALUE FACTOR = (1 + r)n
GROSS INCOME MULTIPLIER = SELLING PRICE GROSS INCOME
GIM
Page 4 of 38
= SP GROSS INCOME = 5.62 0.7685 = 7.31
6. What is the value of a property with a building value of P2.4M, a land

capitalization rate [10] at 8%, building overall rate of 14% and net
income of P545,000?
NOI
545,000
[11]
less: Building NOI
(2.4M x 14%) 336,000
Residual NOI for Land
209,000
[12]
Land value
(209,000 0.08)
2,612,500
Building value
2,400,000
Total value
5,012,500
10
11
12
CAPITALIZATION RATE = NET OPERATING INCOME CAPITAL COST

NET OPERATING INCOME = CAPITAL COST x CAPITALIZATION RATE
CAPITAL COST = NET OPERATING INCOME CAPITALIZATION RATE
Page 5 of 38
7. To adjust the sales price of a comparable sale with a 10% better

location, you should
COMP IS SUPERIOR NEGATIVE ADJUSTMENT

COMP IS INFERIOR - POSITIVE ADJUSTMENT
8. Subject of appraisal is a 4-bedroom house. Based on the ff. paired
data gathered, what would be the estimated value of the subject of
appraisal? Market Data: 3-bedroom house was recently sold for
P6.455M, 2-bedroom house was recently sold for P6.25M
SP DIFFERENCE 3BR & 2BR = 6.455 6.250 = 0.205

4-BR PRICE = 3-BR PRICE + 0.205
= 6.455 + 0.205 = 6.660M
9. A residential house was constructed in 2001 for P12.568M. The cost
index at that time was 178.20. The current cost index from the same
Page 6 of 38
cost reporting service is 360.70. What is the current indicated

reproduction cost of the residential house?
[13]
CURRENT RCN
= 2001 RCN x CURRENT CI 2001 CI
= 12.568 x 360.70 178.20 = 25.439M
10.What is the indicated value of a 6-year old building with a floor area
of 360 m2, if the current cost of construction of similar building is
P15,000 per m2 of the floor area and the estimated depreciation of
the building is 2% per year?
RCNLD
13
14
15
16
[14]
[15]
[16]
= FA
x CURENT CC
x (1 -(AGE x .02))
= 360 x 15,000 x (1 0.12)
REPRODUCTION COST NEW

REPRODUCTION COST NEW LESS DEPRECIATION
FLOOR AREA
CONSTRUCTION COST
Page 7 of 38
= 5.4M x 0.88 = 4.752M

11.A building has a rental income of P60,600 per month. Using an
annual gross rent multiplier of 15, the value of the building would be
estimated at
GIM = SP GPI SP = GIM x GPI

= 15 x (60,600 x 12) = 10,908,000
12.The value of the property consisting of land and building with an
annual NOI of P330,000 and with an overall capitalization rate [17] of
12.5% is
OAR = NOI SP SP = NOI OAR

= 330,000 0.125 = 2,640,000
17
OVERALL RATE OF RETURN = NET OPERATING INCOME PURCHASE/SELLING PRICE
13.Which of the ff. estimates would result in a capitalization rate

8%
a. Property value of P2.5M, PGI of P200,000;
b. Property value of P2.5M, EGI of P200,000;
c. Property value of P2.5M, NOI of P200,000;
d. Property value of P2M, NOI of P320,800.
Page 8 of 38
[18]
of
OAR = NOI CAPITAL COST

= 0.20 2.50 = 0.08 8%
14.The property subject of appraisal is 15% superior than the subject of
a comparable sale. The comparable was sold for P2.212M, what is
the indicated value of the subject?
VALUE = 2,212,000 x (1+0.15) = 2,543,800

18
CAPITALIZATION RATE = NET OPERATING INCOME CAPITAL COST
Page 9 of 38
15.An office building has depreciated by 50% since it was built 25 years
ago. If it would cost P39.2M to build today, and if similar sites are for
P25M, what is the estimated market value of the property today?
[19]
RCNLD
LV + BV
= 39.2 x (1 0.50) = 39.2 x 0.50 = 19.6

= 25 + 19.6 = 44.6M
16.Assume the ff.: annual NOI = P1.1M, land value = 4.5M, interest rate
= 8%, recapture rate = 4%. What is the property value of the building
residual technique?
NOI
1,100,000
[20]
less: LAND NOI (4.5M x 8%)
360,000
Residual NOI (BLDG.)
740,000
19
20
REPRODUCTION COST NEW LESS DEPRECIATION

NET OPERATING INCOME = CAPITAL COST x CAPITALIZATION RATE
Page 10 of 38
[21]
BLDG. VALUE
(740,000 ( 0.08+0.04))
LAND VALUE
TOTAL VALUE
6,166,667
4,500,000
10,666,667
17.Mr. B owns a parcel of land leased to Mr. C at annual rental rate of

P1M. The lease has a remaining life of 6 years. What is the present
value of the rentals, if the interest rate is 10% per year? Present
worth factor for annuity is 4.35526 and the lump sum is 0.56447.
n
FVF = (1+r) = (1.10) = 1.771561

PVF = 1 FVF = 1 1.771561 = 0.564473
PVA = (1 - PVF) r = (1 0.564473) 0.10
21
Page 11 of 38
= 0.435526 0.10 = 4.35526

PV RENTAL = RENTAL x PVA
= 1M x 4.35526 = 4,355,260
PV LUMP SUM = LUMP SUM x PVF
= 6M x 0.564473 = 3,386,435
18.A building was constructed 10 years ago and is well-maintained that
based on the observation of the appraiser its condition is similar to
other 6-year old buildings. The effective age of the building is
years
The effective age of a building is its age in years as compared with
other buildings performing like functions. It is the actual age less any
Page 12 of 38
years that have been taken off by face-lifting, structural

reconstruction, removal of functional inadequacies, etc.
Use the following steps to determine the effective age of a building:
Typical Life: Determine the building's typical life, based on its
occupancy and quality.
Remaining Useful Life: Estimate the building's remaining useful
life, based on an evaluation its condition, construction quality,
actual age and any renovations or repairs that have been made.
Effective Age: Subtract the remaining useful life from the typical
building life to obtain the effective age.
19.A building was constructed 10 years ago and is well-maintained that
based on the observation of the appraiser its condition is similar to
other 6-year old buildings. The actual age of the building is 10
years
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20.The reproduction cost new of a commercial building is estimated to

be P80M. The building should have an economic life of 50 years, and
it is now five years old. However, based on the observation of the
appraiser its effective age is similar to other 10-year old building due
to poor maintenance. What is the value of the building (exclusive of
land value)?
AGE-LIFE METHOD based on the effective age of the property or
component, divided by the total economic life of the property or
component.
RCNLD = RCN x (1 - (EFF. AGE ECON. LIFE))

= 80M x (1 - (10 50)) = 80 x 0.80 = 64M
21.A 10-year old building is currently valued at P7.2M. What was its
original value, if it has appreciated by 60% since it was built?
FV = PV x FVF PV= FV FVF = 72 1.6 = 4.5M
Page 14 of 38
22.The appropriate adjustment for time is determined to 8% per year.

The time adjustment for a comparative property that was sold a year
ago for P10,000 per m2 is
FV = PV x FVF = 10,000 x 0.08 = 800

23.A lessee is renting s commercial space with a base rent of P7,000 per
month plus 5% of the gross sales exceeding P100,000 per month. The
lessees gross sales last year was P1.6M. How much rent was paid last
year?
BASE RENT
= 7,000 x 12 = 84,000
PERCENTAGE = (1.6M -1.2M) x 0.05
= 400,000 x 0.05 = 20,000
GROSS RENT = 84,000 + 20,000 = 104,000
Page 15 of 38
24.A 30-year mortgage covering 75% of property value can be obtained

from a bank for 8.5%. The mortgage constant is 0.092. Equity for this
type of property requires 12% return. What is the capitalization rate?
CAP RATE = (LTV x MC) + (ETV X ED)

= (0.75 x 0.092) + (0.25 x 0.12) = 0.099 9.90%
25.What would be the recapture rate of a building having a remaining
economic life of 12 years?
RECAPTURE RATE = 100% 12 = 0.0833 8.33%

26.In a property residual approach, what is the value of an improved
property with a net income of P180,000 a year, an interest rate of 8%
[22]
and a recapture rate of 2%
BV = NOI CAP RATE = 180,000 (0.80 + 0.20)

22
Page 16 of 38
= 180,000 0.10 = 1,800,000

27.A house and lot is prices at P7.5M. The lot alone is valued at
P2,531,250. What is the percentage of the total asking price as
attributed to the house?
BV = SP LV = 7,500,000 2,531,250 = 4,968,750

%AGE = 4,968,750 7,500,000 = 0.6625 66.25%
28.A vacant lot is rented for a car display for P24,000 per month. The
interest rate applicable to this type of property is 8%. Compute the
value of the property by income approach.
GPI = 24,000 x 12 = 288,000

LV = GPI CAP RATE = 288,000 .08 = 3.6M
Page 17 of 38
29.If a particular buyer requires a recapture of the building portion of

the price in 30 years, what is the indicated recapture rate of the
building?
RECAPTURE RATE = 1 30 = 0.0333 3.33%

30.Mr. A is leasing a 60 m2 commercial space for P3,000 per m2 per year.
Research indicate that similar space have a going market rate of
2
P3,200 per m per year. What is the rental gain realized by Mr. A per
year.
RENTAL GAIN
= (LEASE RENT MARKET RENT) X 12 X FA
= (3,200 3,000) x 12 x 60
= 200 x 12 x 60 = 144,000
Page 18 of 38
31.A house and lot is priced at P8.8M. The lot alone is valued at P1.65M.
What percentage of the total asking price is attributable to the value
of the lot?
PERCENTAGE = 1.65 8.8 = 0.1875 18.75%

32.A property with annual income of P336,000 was sold for P4.2M. The
remaining life of the building is 40 years. Land value is P1.2M. What
is the overall rate of the property?
OAR = NOI SP = 0.336 4.2 = 0.088%

33.A comparable land was sold a year ago for P30,000 per m2. Its
location is considered 15% inferior and its shape and topography is
10% superior to the subject site. The time adjustment is 3% per year.
Determine the adjusted sales price of the comparable site.
Adj.
= +15% -10% +3% = 8% 0.08
Adj. SP
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= SP x (1 + Adj.) = 30,000 x (1.08) = 32,400
34.A property with an annual net operating income of P336,000 was

sold for P4.2M. The remaining lie of the building is 40 years. The land
value is P1.2M. What is the value of the building?
BV = TOTAL VALUE LV = 4.2 1.2 = 3.0

35.A property was sold for P60M. Using the rule-of-thumb of buildingto-land ratio of 4:2, what is the value of the building?
BV LV = 4 2 LV = BV 2
SP = LV + BV = (BV 2) + BV = (BV + 2BV) 2
2SP = 3BV BV = 2SP 3 = (2 x 60) 3 = 120 3 = 40
36.A 10-year old residential apartment has a reproduction cost of
P6.25M, broken down into P2.5M representing the structural
component, and 3.75M for the other component. Yearly allowance
Page 20 of 38
for ordinary deterioration is 2%, while depreciation rate for the

curable component is 5% per year. Economic obsolescence result in a
rental loss of P60,000 per year. What is the estimated value of the
building?
STRU. DEPN. = (2.5 x (10 x 0.02)) = 0.500

CURA. DEPN. = (3.75 x (10 x 0.05)) = 1.875
ECON. DEPN. = (60,000 x 10) = 0.600
RCNLD = 6.25 (0.500 + 1.875 + 0.600) = 3.275
37.A comparable property sold six months ago for P1.25M. Market
investigation indicates the ff.: location adjustment = +5%, time
adjustment = +6%, & age adjustment = -7%. Given the above
information, what is the indicated value of the building?
Adj.
= +5% +6% -7% = +4% 0.04
Adj. SP
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= Comp. SP x (1 + Adj.) = 1.25 x (1.04) = 1.3
38.What is the reversion value of a property with an estimated market

value of P12.54 M 2 years from now at an interest rate of 10% per
year?
2
PV = SP x (1 FVF) SP x (1 (1.10) )
= SP x (1 1.21) = 12.54 x 0.826446
= 10,363,636.36
39.A comparable property is identical to the subject property being
appraised. The comparable was sold six months ago for P1M. As an
appraiser, you must make an adjustment for the time difference
between the subject property and the comparable. You have found a
paired sale of two houses, one which was sold one year ago for
Page 22 of 38
P0.80M and the other sold yesterday for P0.88M. What is the proper
extimated adjusted price for your comparable?
n
n-1
TIME ADJ. = ((SP SP ) -1) = ((0.88 0.080) -1)

= (1.10 -1) = 0.10 10%
SP COMP = SP x (1 + (TIME ADJ. 12 x 6 mos.))
= SP x (1 + (0.10 12 x 6)) = SP x (1 + .05)
= 1 x 1.05 = 1.05
40.If a property has a net income rate of 0.75 and a gross income
multiplier of 9, what is the overall capitalization rate?
NIR = NOI GPI NOI = 0.75GPI

GIM = SP GPI SP = 9GPI
OAR = NOI SP = 0.75GPI 9GPI
Page 23 of 38
= 0.00833 8.33%
41.Corp. T is to lease a parcel of land for 2 year at P2M. Research
indicates that similar land has a market rent of P2.2M per year. What
is the estimated value of the leasehold interest if the rental payment
is to be paid as a lump sum amount today and the interest rate at
10%?
Gross Leasehold Interest (GLI) is the difference between the monthly
rental market value of the property and what the tenant is paying each
month..
GLI = 2.2 2.0 = 0.2

1
PVF = 1 (1.10) = 0.909090
PV = GLI x 0.909090 = 0.2 x 0.909090 = 181,818
Page 24 of 38
42.A commercial structure is a rectangle with sides of 80 m. and 145 m.

and the current local cost to build a similar structure is P18,500 per
m2. What is the estimated construction cost of the structure?
2
FA = L x W = 80 x 145 = 11,600 m
RCN = 11,600 x 18,500 = 214.60 M
Questions 43 TO 45 are based on the ff. information: building value =
P50M, NOI = 8.35M, building cap rate = 14%, land cap rate 9%
43.What is the residual income of the land?
BLDG. NOI = BV x CAP RATE = 50 x 0.14 = 7

RESIDUAL INCOME = 8.35 7 = 1.35
44.What is the value of the land?
LV = RESIDUAL INCOME CAP RATE = 1.35 0.09 = 15

45.What is the total value of the property?
Page 25 of 38
TOTAL VALUE = LV + BV = 50 + 15 = 65
46.Your appraisal assignment involves the estimation of value for a 10
m. by 18 m. parcel of land. You have identified and examined 10
comparables that are similar to the subject property except for size
difference. You have developed a simple linear regression equation
in which sales price (expressed in thousands of pesos) is the
2
dependent varaiable ans size (expressed in m ) is the independent
varaiable. The equation you have developed is Yc = 180,000 +
1,000(x). Using this equation and information given, what is the
indicated sales price for the subject property?
Yc = 180,000 + 1,000(x)
= 180,000 + (1,000 x 180) = 360,000
47.An appraiser has been asked to estimate the value of a lot in the
same neighbourhood, the appraiser collects the ff. sales data:
Lot Sale Sales Price

1
144,250
2
147,050
3
145,600
Page 26 of 38
Time of Sale
4 mos. Ago
2 mos. Ago
3 mos. Ago
Adj. Total
5,770 150,020
2, 941 149,991
4,368 149,968
449,979
Average
3 149,993
The price appreciation for lots is estimated to be at the rate of 1%
per month (simple, not compounded). Given the above information,
what is the estimated value of the subject property?
EST. VALUE = 449,979 3 = 149,993 150,000

2
48.A house is being appraised has a total living area of 50 m . For a

house of similar quality construction, national cost service indicates a
2
cost of P15,000 per m . The locational multiplier is 0.95. The cost
figures are five months old and the appraiser estimates the
Page 27 of 38
construction costs have increased 5% during the period. What is the

current estimated replacement cost of this house?
RCN = FA x CC x LM x INC
= 50 x 15,000 x 0.95 x 1.05 = 748,125
49.A building has a roof that originally has an expected life of 25 years.
The roofs effective age is 15 years. A new roof will cost P100,000 to
install. Using a straight line method, what amount of depreciation
would be charged to the roof?
DEPN. = RCN x (AGE LIFE)

= 100,000 x (15 25) = 60,000
50.You have collected the ff. data on a comparable property, which you
plan to use in estimating the gross rent multiplier for rental
properties in a neighbourhood: sales price is P1M, annual rent is
Page 28 of 38
P60,000, annual property taxes is P9,000, monthly mortgage

payment is P7,150. What is the monthly gross rent multiplier
indicated by this property?
GIM = SP GPI = 1,000,000 (60,000 12) = 200

51.A mortgage loan for P300,000 at 9% p.a. for 30 years has been made.
What is the amount of interest for the first month?
SIMPLE INTEREST = 300,000 x (9 12) = 2,250

52.In collecting data, an appraiser concludes that comparable properties
have increased in value at 6% annual compound rate during the
previous 2 years. The proper time adjustment to make for a
comparable that sold 2 years ago for P1M is :
2
FV = 1M x (1.06) = 1,123,600
53.A single-family residence located on a busy street rents for P500 per
month less than similar rental properties located on other streets in
Page 29 of 38
the same area. The average gross rent multiplier in this

neighbourhood is 110. What is the lump sum peso adjustment for
the locational obsolescence of the residence?
GIM = 500 x 110 = 55,000

54.An appraiser is attempting to estimate the value of a house. The
Subject property has 4 bedrooms and a swimming pool. The
appraiser has found three comparables that have recently sold.
Sales
Swimming
Comparable
Bedrooms
Adj.
Price
Pool
1
1,100,000
5
No
1,150,000
2
1,010,000
4
No
1,160,000
3
1,040,000
3
Yes
1,140,000
3,450,000
3
1,150,000
Page 30 of 38
The appraiser estimates that each bedroom has a worth of P100,000

and a swimming pool is worth of P150,000.
Given the above information, what is the estimated value of the
subject property using the average derived from the comparables?
For questions 55 to 59, subject of appraisal is a house and lot and the
comparables are as ff.:
Price
Type of
Data
Location
Type of
Consn.
Subject
???
Good
Data 1
1.45M
Data 2
1.36M
Data 3
1.35M
Data 4
1.41M
Data 5
1.53M
Sale
Sale
Sale
Sale
Offer
Good
Good
Poor
Good
Good
Concrete Concrete Timber Concrete Timber Concrete
No. of
Bedrooms
Page 31 of 38
55.What is the adjustment for type of data sales vs. offer?
OFFER ADJ. = 1.53 1.45 = 0.08

56.What is the adjustment for location?
LOC. ADJ. = 1.45 1.35 = 0.10

57.What is the adjustment for type of construction?
CONSN. ADJ. = 1.45 1.36 = 0.09

58.What is the adjustment for bedrooms?
BR. ADJ. = 1.41 1.36 = 0.05

59.What is the estimated value of the property assuming the data have
equal importance?
Subject
Data 1
Data 2
Data 3
Data 4
Data 5
Price
Offer
Poor
Location
Timber
Bedrooms
Adj. Price
???
1.45M
1.36M
1.35M
1.41M
Page 32 of 38
1.53M
(0.08)
0.10
0.09
1.45
1.45
1.45
1.45
0.09
(0.05)
1.45
1.45
60.A tract of land containing 4 has. Recently sold for P600 per m2. What
is the estimated value?
VALUE = 4 x 10,000 x 600 = 24,000,000

61.A house with a total living area of 100 m2 would cost P10,000 per m2
to reproduce new. It has an expected economic life of 50 years and is
estimated to have an effective age of 5 years. The lot has a market
value of P2.5M. What is the estimated value of the property using
the cost approach?
Page 33 of 38
RCNLD = 100 x 10,000 x 0.90 = 900,000

LV + BV = 2.5 + 0.90 = 3.40
62.What is the percentage of accrued depreciation for a 15-year old
building, if the building has an effective age of 20 years and a
remaining life of 30 years.
DEPN. % = EA EL = 20 (20 +30) = 40%

63.A comparable property sold 6 mos. ago for P1.25M. Market
investigation indicates the ff.: location adj. = +5%, time adj. = +6%,
age adj. = -7%. Given the above information, what is the indicated
value based on the comparable property?
adj. = +5% +6% -7% = +4%

ADJ. SP = 1.25 x 1.04 = 1.3
Page 34 of 38
64. An office building has 1,000 m of net leasable space. The owner has
an annual mortgage payment of P750,000 and expects operating
expense to be P250,000. If the owner wants a before-tax cash flow of
P500,000, what should the gross rent per m2 be on a monthly basis?
EGI = BTCF + AMP = 0.50 + 0.75 = 1.25

GPI = EGI + OPEX = 1.25 + 0.25 = 1.5
2
GROSS RENT PER M PER MO. = 1.5M 1,000 12 =
125
65.A property has NOI of P1M, interest payment of P0.80M and
principal payment of P0.10. What is the debt coverage ratio
DCR = NOI DS = 1 0.90 = 1.11

23
DEBT COVERAGE RATIO = NET OPERATING INCOME DEBT SERVICE
[23]
Page 35 of 38
66. Given the ff. information: bldg. cap. rate = 0.11, land cap. rate =
0.09, land value as a percent of total value = 35%. What is the overall
cap. Rate by using the band of investment approach?
BOI = (LVR x rate) + (BVR x rate)

= (0.35 x 0.09) + (0.65 x 0.11)
= .0315 + 0.0715% = 0.103% 10.3%
67.A small restaurant contains an oven and a freezer, each of which
costs P9,000 and has an estimated useful life of 10 years. Carpeting
cost P35,000 and has an estimated useful life of 7 years. What annual
reserve for replacement would be appropriate for these?
ANNUAL RESERVE = (OvFr UL) + (Car UL)

= (18,000 10) + (35,000 7)
= 1,800 + 5,000 = 6,800
Page 36 of 38
68.Given the ff. information: what is the building capitalization rate for
the subject property? Land value P0.60M, NOI = 0.25M, land cap.
Rate = 8% & OAR = 9%.
CAP. COST = NOI OAR

= 250,000 0.09 = 2,777,777
BV = CAP. COST LV = 2,177,777.78
LVR = 600,000 2,777,777 = 21.60%
BVR = 100% - 21.60% = 78.40%
OAR = (LVR x Lcr) + (BVR x Bcr)
9% = (0.216 x 0.08) + (0.784 x Bcr)
0.784 Bcr = 9% - 0.01728
Bcr = 0.7272 0.784 = 0.0928 9.3%
Page 37 of 38
69.If a property has an overall capitalization rate of 0.95 and a mortgage

at a 75% loan-to-value ratio having an annual mortgage constant of
0.11, what is the equity debt ratio?
OAR = (LVR x MC) + (BVR x EDr)

9.5% = (.75 x 0.11) + (0.25 x EDr)
0.25 Bcr = 9.5% - 0.0825
EDr = 0.0125 0.25 = 0.05 5%
70.If a property has a net income ratio of 0.75 and a gross income
multiplier of 9, what is the indicated overall capitalization rate?
GIM = SP GPI GPI = SP GIM

NIR = NOI GPI GPI = NOI NIR
SP 9 = NOI 0.75
NOI SP = 0.75 9 = 0.0833 8.33%
Page 38 of 38

Module 6 - Solution To Math Exam

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MODULE 6 (SOLUTION TO MATH EXAM)

1. If a propertys net income ratio

is 0.80, what is the operating

NIR + OER = 1 OER = 1 NIR

NET INCOME RATIO (NIR) = NET INCOME GROSS INCOME