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ree3043 exam 5 Questions and Correct
Answers
Given the following information regarding an income
producing property, determine the NPV using levered cash
flows in your analysis: required equity investment:
$270,000; expected NOI for each of the next five years:
$150,000; debt service for each of the next five years:
$125,000; expected holding period: five years; required
yield on levered cash flows: 15%; expected sale price at end
of year 5: $2,000,000; expected cost of sale: $125,000;
expected mortgage balance at time of sale: $1,500,000.
A.$245.15
B. $270,245.15
C. $419,264.54
D. $1,435,029.64 Ans: A
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, 2 | Page
Determine the net present value (NPV) of an investment
decision to purchase a property for $90,000 that will
generate annual cash flows of $10,000 per year for eight
years and sell for $80,000 at the end of the eight-year
holding period, if the appropriate discount rate is 10%?
(Note: assume payments are made at end of year.)
A. −$2,475
B. −$609
C. +$669.85
D. +$2,475 Ans: C
Given the following expected cash flow stream, determine
the IRR of the proposed investment in an income-producing
property and determine whether or not the investment
should be pursued using IRR as your decision-making
criteria: investment horizon: five years; expected yearly
cash flow in each of the next five years: $127,628; expected
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, 3 | Page
sale price at end of five years: $1,595,350; required return
on equity: 5%; current market price of property: $1,750,000
A. IRR is 4.92%; decision is to invest.
b. IRR is 4.92%; decision is to not invest.
C. IRR is 5.72%; decision is to invest.
D. IRR is 5.72%; decision is to not invest. Ans: C
To overcome the potential shortcomings of single-year
decision-making metrics, many investors in real estate also
perform multiyear discounted cash flow (DCF) valuation.
DCF valuation differs from the single-year ratio analysis in
all of the following ways except
© 2025 All rights reserved
ree3043 exam 5 Questions and Correct
Answers
Given the following information regarding an income
producing property, determine the NPV using levered cash
flows in your analysis: required equity investment:
$270,000; expected NOI for each of the next five years:
$150,000; debt service for each of the next five years:
$125,000; expected holding period: five years; required
yield on levered cash flows: 15%; expected sale price at end
of year 5: $2,000,000; expected cost of sale: $125,000;
expected mortgage balance at time of sale: $1,500,000.
A.$245.15
B. $270,245.15
C. $419,264.54
D. $1,435,029.64 Ans: A
© 2025 All rights reserved
, 2 | Page
Determine the net present value (NPV) of an investment
decision to purchase a property for $90,000 that will
generate annual cash flows of $10,000 per year for eight
years and sell for $80,000 at the end of the eight-year
holding period, if the appropriate discount rate is 10%?
(Note: assume payments are made at end of year.)
A. −$2,475
B. −$609
C. +$669.85
D. +$2,475 Ans: C
Given the following expected cash flow stream, determine
the IRR of the proposed investment in an income-producing
property and determine whether or not the investment
should be pursued using IRR as your decision-making
criteria: investment horizon: five years; expected yearly
cash flow in each of the next five years: $127,628; expected
© 2025 All rights reserved
, 3 | Page
sale price at end of five years: $1,595,350; required return
on equity: 5%; current market price of property: $1,750,000
A. IRR is 4.92%; decision is to invest.
b. IRR is 4.92%; decision is to not invest.
C. IRR is 5.72%; decision is to invest.
D. IRR is 5.72%; decision is to not invest. Ans: C
To overcome the potential shortcomings of single-year
decision-making metrics, many investors in real estate also
perform multiyear discounted cash flow (DCF) valuation.
DCF valuation differs from the single-year ratio analysis in
all of the following ways except
© 2025 All rights reserved
