CCIM 101 EXAM 1 - FINANCIAL
ANALYSIS FOR COMMERCIAL
INVESTMENT REAL ESTATE
QUESTIONS AND ANSWERS 100%
VERIFIED. JUST RELEASED
1. If an investor requires a 12% return and a property offers an NPV of $25,000 at a 12%
discount rate, which of the following is true regarding the IRR?
A. The IRR is exactly 12%
B. The IRR is less than 12%
C. The IRR is greater than 12%
D. The IRR cannot be determined from the information provided
Answer: C
Conceptual Explanation: If the Net Present Value (NPV) is positive at a specific discount
rate, the Internal Rate of Return (IRR) must be higher than that discount rate.
2. Calculate the Net Operating Income (NOI) given the following: PGI $200,000; Vacancy 5%;
Operating Expenses $75,000; Debt Service $50,000.
A. $125,000
B. $70,000
,C. $65,000
D. $115,000
Answer: D
Conceptual Explanation: NOI = (PGI * (1 - Vacancy)) - Operating Expenses. $200,000 *
0.95 = $190,000 (EGI). $190,000 - $75,000 = $115,000.
3. What is the annual mortgage constant for a $1,000,000 loan with monthly payments of
$6,500?
A. 0.0650
B. 0.1200
C. 0.0065
D. 0.0780
Answer: D
Conceptual Explanation: The mortgage constant = Annual Debt Service / Loan Amount.
($6,500 * 12) / $1,000,000 = $78,000 / $1,000,000 = 0.078.
4. A commercial property was purchased for $2,500,000. If the land value is 20% and it is a
non-residential property, what is the annual cost recovery (depreciation) deduction?
A. $90,909
B. $72,727
C. $64,103
, D. $51,282
Answer: D
Conceptual Explanation: Depreciable basis = $2,500,000 * 0.80 = $2,000,000. For non-
residential, use 39 years. $2,000, = $51,282.
5. Which ratio measures the ability of a property’s NOI to cover the mortgage payments?
A. Operating Expense Ratio
B. Loan-to-Value Ratio
C. Debt Coverage Ratio
D. Break-Even Ratio
Answer: C
Conceptual Explanation: The Debt Coverage Ratio (DCR) is NOI divided by Annual Debt
Service, indicating the safety margin for the lender.
6. An investor places $50,000 in an account earning 6% interest compounded monthly. What
is the value after 5 years?
A. $67,442.51
B. $65,000.00
C. $66,911.28
D. $67,342.75
ANALYSIS FOR COMMERCIAL
INVESTMENT REAL ESTATE
QUESTIONS AND ANSWERS 100%
VERIFIED. JUST RELEASED
1. If an investor requires a 12% return and a property offers an NPV of $25,000 at a 12%
discount rate, which of the following is true regarding the IRR?
A. The IRR is exactly 12%
B. The IRR is less than 12%
C. The IRR is greater than 12%
D. The IRR cannot be determined from the information provided
Answer: C
Conceptual Explanation: If the Net Present Value (NPV) is positive at a specific discount
rate, the Internal Rate of Return (IRR) must be higher than that discount rate.
2. Calculate the Net Operating Income (NOI) given the following: PGI $200,000; Vacancy 5%;
Operating Expenses $75,000; Debt Service $50,000.
A. $125,000
B. $70,000
,C. $65,000
D. $115,000
Answer: D
Conceptual Explanation: NOI = (PGI * (1 - Vacancy)) - Operating Expenses. $200,000 *
0.95 = $190,000 (EGI). $190,000 - $75,000 = $115,000.
3. What is the annual mortgage constant for a $1,000,000 loan with monthly payments of
$6,500?
A. 0.0650
B. 0.1200
C. 0.0065
D. 0.0780
Answer: D
Conceptual Explanation: The mortgage constant = Annual Debt Service / Loan Amount.
($6,500 * 12) / $1,000,000 = $78,000 / $1,000,000 = 0.078.
4. A commercial property was purchased for $2,500,000. If the land value is 20% and it is a
non-residential property, what is the annual cost recovery (depreciation) deduction?
A. $90,909
B. $72,727
C. $64,103
, D. $51,282
Answer: D
Conceptual Explanation: Depreciable basis = $2,500,000 * 0.80 = $2,000,000. For non-
residential, use 39 years. $2,000, = $51,282.
5. Which ratio measures the ability of a property’s NOI to cover the mortgage payments?
A. Operating Expense Ratio
B. Loan-to-Value Ratio
C. Debt Coverage Ratio
D. Break-Even Ratio
Answer: C
Conceptual Explanation: The Debt Coverage Ratio (DCR) is NOI divided by Annual Debt
Service, indicating the safety margin for the lender.
6. An investor places $50,000 in an account earning 6% interest compounded monthly. What
is the value after 5 years?
A. $67,442.51
B. $65,000.00
C. $66,911.28
D. $67,342.75
