CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
CBRE Financial Consulting Group (FCG)
Exam questions and answers with rationales 2026 update
100 Multiple-Choice Questions
1. What is Net Operating Income (NOI)?
A. Total revenue minus operating expenses, excluding debt service and capital
expenditures
B. Total revenue minus all expenses including debt service and taxes
C. Gross rental income minus vacancy and collection losses only
D. Effective gross income multiplied by the capitalization rate
Answer: A
Rationale: NOI is defined as all revenue from the property minus operating expenses
(OPEX), excluding debt service, capital expenditures, depreciation, and income taxes.
It is a key metric used in income approach valuation and represents the property's
ability to generate income from operations alone.
2. A
property generates $1,200,000 in effective gross income and $480,000 in
operating expenses. What is the NOI?
A. $480,000
B. $720,000
C. $1,200,000
D. $1,680,000
Answer: B
Rationale: NOI = Effective Gross Income - Operating Expenses = $1,200,000 -
$480,000 = $720,000. This straightforward calculation is fundamental to all income-
based property valuation and underwriting analysis.
3. What is a capitalization rate (cap rate) and how is it calculated?
A. NOI divided by the loan amount
B. NOI divided by the property's purchase price or current market value
C. Annual debt service divided by the loan amount
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,CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
D. Cash flow after financing divided by equity invested
Answer: B
Rationale: The cap rate equals NOI divided by the property value or purchase price. It
represents the unlevered, annual rate of return an investor would expect from the
property, and it is widely used to compare investment opportunities across different
markets and property types.
4. Ifa property has an NOI of $500,000 and is valued at $6,250,000, what is the
cap rate?
A. 6.0%
B. 7.5%
C. 8.0%
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,CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
D. 12.5%
Answer: C
Rationale: Cap Rate = NOI / Property Value = $500,000 / $6,250,000 = 0.08 or
8.0%. This cap rate indicates the unlevered yield an investor receives based on the
acquisition price, and it is a standard benchmark for comparing commercial real
estate investments.
5. In a Discounted Cash Flow (DCF) analysis, what does the terminal value
(reversion) represent?
A. The net present value of all operating cash flows during the holding period
B. The projected sale price of the property at the end of the holding period
C. The total renovation costs at the end of the lease term
D. The remaining mortgage balance at disposition
Answer: B
Rationale: The terminal value, or reversion, represents the estimated proceeds from
selling the property at the end of the investment holding period. It is typically
calculated by capitalizing the NOI in the final year using a terminal cap rate, and it is
then discounted back to present value along with interim cash flows.
6. What is Internal Rate of Return (IRR)?
A. The average annual cash flow divided by the initial investment
B. The discount rate at which the net present value of all cash flows equals zero
C. The total profit divided by the holding period in years
D. The cap rate plus the annual appreciation rate
Answer: B
Rationale: IRR is the discount rate that makes the NPV of all cash flows (both
negative and positive) from an investment equal to zero. It accounts for the timing
and magnitude of each cash flow, making it a more comprehensive return metric
than simple average returns or cap rates.
7. Aninvestor purchases a property for $10,000,000 with $4,000,000 in
equity and a $6,000,000 interest-only loan at 5.5%. Year 1 NOI is
$750,000. What is the Year 1 cash-on-cash return?
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, CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
A. 5.5%
B. 7.5%
C. 10.5%
D. 18.75%
Answer: C
Rationale: Annual debt service = $6,000,000 x 5.5% = $330,000. Cash flow after
debt service = $750,000 - $330,000 =
$420,000. Cash-on-cash return = $420,000 / $4,000,000 = 10.5%. This measures the
annual cash yield on the equity invested.
8. What is the primary difference between IRR and equity multiple?
A. IRR measures total profit while equity multiple measures annual return
B. IRR accounts for the time value of money while equity multiple does not
C. Equity multiple accounts for the time value of money while IRR does not
D. They are the same metric expressed differently
Answer: B
Rationale: IRR incorporates the timing of cash flows and produces an annualized
percentage return, while equity multiple simply divides total distributions by total
equity invested without considering when cash flows occur. A project can have a high
equity multiple but a modest IRR if returns are back-loaded.
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CBRE Financial Consulting Group (FCG)
Exam questions and answers with rationales 2026 update
100 Multiple-Choice Questions
1. What is Net Operating Income (NOI)?
A. Total revenue minus operating expenses, excluding debt service and capital
expenditures
B. Total revenue minus all expenses including debt service and taxes
C. Gross rental income minus vacancy and collection losses only
D. Effective gross income multiplied by the capitalization rate
Answer: A
Rationale: NOI is defined as all revenue from the property minus operating expenses
(OPEX), excluding debt service, capital expenditures, depreciation, and income taxes.
It is a key metric used in income approach valuation and represents the property's
ability to generate income from operations alone.
2. A
property generates $1,200,000 in effective gross income and $480,000 in
operating expenses. What is the NOI?
A. $480,000
B. $720,000
C. $1,200,000
D. $1,680,000
Answer: B
Rationale: NOI = Effective Gross Income - Operating Expenses = $1,200,000 -
$480,000 = $720,000. This straightforward calculation is fundamental to all income-
based property valuation and underwriting analysis.
3. What is a capitalization rate (cap rate) and how is it calculated?
A. NOI divided by the loan amount
B. NOI divided by the property's purchase price or current market value
C. Annual debt service divided by the loan amount
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,CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
D. Cash flow after financing divided by equity invested
Answer: B
Rationale: The cap rate equals NOI divided by the property value or purchase price. It
represents the unlevered, annual rate of return an investor would expect from the
property, and it is widely used to compare investment opportunities across different
markets and property types.
4. Ifa property has an NOI of $500,000 and is valued at $6,250,000, what is the
cap rate?
A. 6.0%
B. 7.5%
C. 8.0%
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,CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
D. 12.5%
Answer: C
Rationale: Cap Rate = NOI / Property Value = $500,000 / $6,250,000 = 0.08 or
8.0%. This cap rate indicates the unlevered yield an investor receives based on the
acquisition price, and it is a standard benchmark for comparing commercial real
estate investments.
5. In a Discounted Cash Flow (DCF) analysis, what does the terminal value
(reversion) represent?
A. The net present value of all operating cash flows during the holding period
B. The projected sale price of the property at the end of the holding period
C. The total renovation costs at the end of the lease term
D. The remaining mortgage balance at disposition
Answer: B
Rationale: The terminal value, or reversion, represents the estimated proceeds from
selling the property at the end of the investment holding period. It is typically
calculated by capitalizing the NOI in the final year using a terminal cap rate, and it is
then discounted back to present value along with interim cash flows.
6. What is Internal Rate of Return (IRR)?
A. The average annual cash flow divided by the initial investment
B. The discount rate at which the net present value of all cash flows equals zero
C. The total profit divided by the holding period in years
D. The cap rate plus the annual appreciation rate
Answer: B
Rationale: IRR is the discount rate that makes the NPV of all cash flows (both
negative and positive) from an investment equal to zero. It accounts for the timing
and magnitude of each cash flow, making it a more comprehensive return metric
than simple average returns or cap rates.
7. Aninvestor purchases a property for $10,000,000 with $4,000,000 in
equity and a $6,000,000 interest-only loan at 5.5%. Year 1 NOI is
$750,000. What is the Year 1 cash-on-cash return?
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, CBRE FCG Exam Preparation 100 Questions with Answers and Rationales
A. 5.5%
B. 7.5%
C. 10.5%
D. 18.75%
Answer: C
Rationale: Annual debt service = $6,000,000 x 5.5% = $330,000. Cash flow after
debt service = $750,000 - $330,000 =
$420,000. Cash-on-cash return = $420,000 / $4,000,000 = 10.5%. This measures the
annual cash yield on the equity invested.
8. What is the primary difference between IRR and equity multiple?
A. IRR measures total profit while equity multiple measures annual return
B. IRR accounts for the time value of money while equity multiple does not
C. Equity multiple accounts for the time value of money while IRR does not
D. They are the same metric expressed differently
Answer: B
Rationale: IRR incorporates the timing of cash flows and produces an annualized
percentage return, while equity multiple simply divides total distributions by total
equity invested without considering when cash flows occur. A project can have a high
equity multiple but a modest IRR if returns are back-loaded.
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