CCIM 101 FINANCIAL ANALYSIS FINAL
EXAM 2026/2027 QUESTIONS &
VERIFIED ANSWERS 2026/2027 UPDATE
1. Which of the following best describes the difference between the Internal Rate of Return
(IRR) and the Net Present Value (NPV)?
A. IRR is a dollar amount representing value added, while NPV is a percentage return.
B. IRR is used only for unleveraged analysis, while NPV is used for leveraged analysis.
C. NPV assumes reinvestment at the discount rate, whereas IRR assumes reinvestment at
the calculated IRR itself.
D. NPV is a time-weighted measure, whereas IRR is a dollar-weighted measure that ignores
timing.
Answer: C
Conceptual Explanation: A fundamental difference in reinvestment assumptions is that
NPV assumes cash flows are reinvested at the discount rate (hurdle rate), while IRR
assumes they are reinvested at the internal rate of return, which can lead to unrealistic
results if the IRR is very high.
,2. When partitioning the IRR of a 5-year investment, what does the ‘Sale’ component
represent?
A. The percentage of the total IRR derived from the appreciation and mortgage paydown at
disposition.
B. The total cash flow received from the sale before taxes.
C. The discounted value of the annual operating income.
D. The difference between the terminal cap rate and the going-in cap rate.
Answer: A
Conceptual Explanation: Partitioning the IRR breaks the total return into two parts: the
portion coming from annual operations and the portion coming from the net sale proceeds
(appreciation and equity buildup).
3. An investor has a required rate of return of 10%. A project has an NPV of -$50,000. Which
statement is true?
A. The project’s IRR is exactly 10%.
B. The project’s IRR is less than 10%.
C. The project’s IRR is greater than 10%.
D. The project is profitable and should be accepted.
Answer: B
, Conceptual Explanation: If the NPV is negative at a specific discount rate, it means the
investment’s actual rate of return (IRR) is lower than that discount rate.
4. What is the formula for the Debt Coverage Ratio (DCR)?
A. Net Operating Income / Total Operating Expenses
B. Before-Tax Cash Flow / Annual Debt Service
C. Effective Gross Income / Annual Debt Service
D. Net Operating Income / Annual Debt Service
Answer: D
Conceptual Explanation: The DCR measures the property’s ability to cover its debt
obligations and is calculated by dividing the NOI by the annual debt service.
5. Which lease structure typically requires the tenant to pay for property taxes, insurance,
and maintenance costs?
A. Gross Lease
B. Triple Net (NNN) Lease
C. Modified Gross Lease
D. Full Service Lease
Answer: B
Conceptual Explanation: In a Triple Net Lease, the tenant is responsible for the three
‘nets’: taxes, insurance, and common area maintenance/repairs.
EXAM 2026/2027 QUESTIONS &
VERIFIED ANSWERS 2026/2027 UPDATE
1. Which of the following best describes the difference between the Internal Rate of Return
(IRR) and the Net Present Value (NPV)?
A. IRR is a dollar amount representing value added, while NPV is a percentage return.
B. IRR is used only for unleveraged analysis, while NPV is used for leveraged analysis.
C. NPV assumes reinvestment at the discount rate, whereas IRR assumes reinvestment at
the calculated IRR itself.
D. NPV is a time-weighted measure, whereas IRR is a dollar-weighted measure that ignores
timing.
Answer: C
Conceptual Explanation: A fundamental difference in reinvestment assumptions is that
NPV assumes cash flows are reinvested at the discount rate (hurdle rate), while IRR
assumes they are reinvested at the internal rate of return, which can lead to unrealistic
results if the IRR is very high.
,2. When partitioning the IRR of a 5-year investment, what does the ‘Sale’ component
represent?
A. The percentage of the total IRR derived from the appreciation and mortgage paydown at
disposition.
B. The total cash flow received from the sale before taxes.
C. The discounted value of the annual operating income.
D. The difference between the terminal cap rate and the going-in cap rate.
Answer: A
Conceptual Explanation: Partitioning the IRR breaks the total return into two parts: the
portion coming from annual operations and the portion coming from the net sale proceeds
(appreciation and equity buildup).
3. An investor has a required rate of return of 10%. A project has an NPV of -$50,000. Which
statement is true?
A. The project’s IRR is exactly 10%.
B. The project’s IRR is less than 10%.
C. The project’s IRR is greater than 10%.
D. The project is profitable and should be accepted.
Answer: B
, Conceptual Explanation: If the NPV is negative at a specific discount rate, it means the
investment’s actual rate of return (IRR) is lower than that discount rate.
4. What is the formula for the Debt Coverage Ratio (DCR)?
A. Net Operating Income / Total Operating Expenses
B. Before-Tax Cash Flow / Annual Debt Service
C. Effective Gross Income / Annual Debt Service
D. Net Operating Income / Annual Debt Service
Answer: D
Conceptual Explanation: The DCR measures the property’s ability to cover its debt
obligations and is calculated by dividing the NOI by the annual debt service.
5. Which lease structure typically requires the tenant to pay for property taxes, insurance,
and maintenance costs?
A. Gross Lease
B. Triple Net (NNN) Lease
C. Modified Gross Lease
D. Full Service Lease
Answer: B
Conceptual Explanation: In a Triple Net Lease, the tenant is responsible for the three
‘nets’: taxes, insurance, and common area maintenance/repairs.
