CCIM 101 FINANCIAL ANALYSIS FOR
COMMERCIAL INVESTMENT REAL
ESTATE FINAL EXAM QUESTIONS AND
ANSWERS 100% VERIFIED. JUST
RELEASED
1. Which of the following best describes the difference between the Internal Rate of Return
(IRR) and the Net Present Value (NPV)?
A. IRR measures the dollar amount of value created, while NPV measures the percentage
rate of return.
B. IRR is the discount rate that makes the NPV equal to zero, while NPV measures the
absolute wealth increase in today’s dollars.
C. NPV assumes reinvestment at the IRR, while IRR assumes reinvestment at the discount
rate.
D. IRR is always more reliable than NPV when comparing projects of different scales.
Answer: B
Conceptual Explanation: The IRR is the specific discount rate where the present value of
cash inflows equals the present value of cash outflows (NPV = 0). NPV provides the total
dollar impact of an investment at a specific required rate of return.
,2. An investor is looking at a property with a Net Operating Income (NOI) of $150,000. If the
market cap rate is 7.5%, what is the indicated value of the property?
A. $1,125,000
B. $1,850,000
C. $2,150,000
D. $2,000,000
Answer: D
Conceptual Explanation: Value = NOI / Cap Rate. $150,.075 = $2,000,000.
3. What is the primary purpose of partitioning the Internal Rate of Return (IRR)?
A. To determine the percentage of the total return that comes from annual operations
versus the sale of the property.
B. To calculate the tax liability for each year of the holding period.
C. To calculate the exact date when the investor will break even.
D. To determine the difference between the before-tax and after-tax cash flows.
Answer: A
Conceptual Explanation: Partitioning the IRR helps an investor understand the risk
profile by showing how much of the return is dependent on future appreciation (reversion)
versus immediate cash flow (operations).
, 4. In a triple-net (NNN) lease, which of the following expenses is typically the responsibility of
the landlord?
A. Property taxes
B. Property insurance
C. Common area maintenance (CAM)
D. Roof and structural repairs
Answer: D
Conceptual Explanation: In a standard NNN lease, the tenant pays taxes, insurance, and
CAM. The landlord is generally responsible for capital expenses like the roof and structure,
unless it is an ‘Absolute NNN’ lease.
5. A property has a Potential Gross Income (PGI) of $500,000, a vacancy rate of 10%, and
operating expenses of $180,000. What is the Operating Expense Ratio (OER)?
A. 36.0%
B. 39.2%
C. 45.0%
D. 40.0%
Answer: D
Conceptual Explanation: Effective Gross Income (EGI) = $500,000 * 0.90 = $450,000. OER
= Operating Expenses / EGI = $180,000 / $450,000 = 0.40 or 40%.
COMMERCIAL INVESTMENT REAL
ESTATE FINAL EXAM QUESTIONS AND
ANSWERS 100% VERIFIED. JUST
RELEASED
1. Which of the following best describes the difference between the Internal Rate of Return
(IRR) and the Net Present Value (NPV)?
A. IRR measures the dollar amount of value created, while NPV measures the percentage
rate of return.
B. IRR is the discount rate that makes the NPV equal to zero, while NPV measures the
absolute wealth increase in today’s dollars.
C. NPV assumes reinvestment at the IRR, while IRR assumes reinvestment at the discount
rate.
D. IRR is always more reliable than NPV when comparing projects of different scales.
Answer: B
Conceptual Explanation: The IRR is the specific discount rate where the present value of
cash inflows equals the present value of cash outflows (NPV = 0). NPV provides the total
dollar impact of an investment at a specific required rate of return.
,2. An investor is looking at a property with a Net Operating Income (NOI) of $150,000. If the
market cap rate is 7.5%, what is the indicated value of the property?
A. $1,125,000
B. $1,850,000
C. $2,150,000
D. $2,000,000
Answer: D
Conceptual Explanation: Value = NOI / Cap Rate. $150,.075 = $2,000,000.
3. What is the primary purpose of partitioning the Internal Rate of Return (IRR)?
A. To determine the percentage of the total return that comes from annual operations
versus the sale of the property.
B. To calculate the tax liability for each year of the holding period.
C. To calculate the exact date when the investor will break even.
D. To determine the difference between the before-tax and after-tax cash flows.
Answer: A
Conceptual Explanation: Partitioning the IRR helps an investor understand the risk
profile by showing how much of the return is dependent on future appreciation (reversion)
versus immediate cash flow (operations).
, 4. In a triple-net (NNN) lease, which of the following expenses is typically the responsibility of
the landlord?
A. Property taxes
B. Property insurance
C. Common area maintenance (CAM)
D. Roof and structural repairs
Answer: D
Conceptual Explanation: In a standard NNN lease, the tenant pays taxes, insurance, and
CAM. The landlord is generally responsible for capital expenses like the roof and structure,
unless it is an ‘Absolute NNN’ lease.
5. A property has a Potential Gross Income (PGI) of $500,000, a vacancy rate of 10%, and
operating expenses of $180,000. What is the Operating Expense Ratio (OER)?
A. 36.0%
B. 39.2%
C. 45.0%
D. 40.0%
Answer: D
Conceptual Explanation: Effective Gross Income (EGI) = $500,000 * 0.90 = $450,000. OER
= Operating Expenses / EGI = $180,000 / $450,000 = 0.40 or 40%.
