CCIM 101 Financial Analysis Final Exam V2 | CCIM
101 Financial Analysis | Actual Q&A with Rationale
(CCIM101 Financial Analysis Final Exam) | CCIM
Institute
1. An investor is evaluating a property with a Potential Gross Income (PGI) of $200,000, a
vacancy and collection loss of 5%, and operating expenses totaling $70,000. What is the Net
Operating Income (NOI)?
A. $130,000
B. $120,000
C. $190,000
D. $125,000
Correct Answer: B
Explanation: To calculate the Net Operating Income, first subtract the vacancy loss from
the PGI to find the Effective Gross Income (EGI). In this case, $200,000 minus 5% ($10,000)
equals $190,000. Finally, subtracting the $70,000 in operating expenses results in an NOI of
$120,000.
2. Select all of the following items that are considered operating expenses when calculating
Net Operating Income (NOI). (Select All That Apply)
A. Property Taxes
B. Debt Service (Mortgage Payments)
,C. Property Insurance
D. Income Tax Liability
E. Utilities
F. Property Management Fees
Correct Answer: ACEF
Explanation: Operating expenses include costs necessary to maintain and operate the
property, such as taxes, insurance, utilities, and management fees. Debt service is a
financing cost, and income tax is a personal or corporate liability, neither of which are
deducted to reach NOI. Correct identification of these expenses is vital for accurate
property valuation and cap rate analysis.
3. If an investor purchases a property for $1,000,000 with an annual Net Operating Income
(NOI) of $85,000, what is the Capitalization Rate (Cap Rate)?
A. 7.5%
B. 9.0%
C. 11.7%
D. 8.5%
Correct Answer: D
Explanation: The Capitalization Rate is calculated by dividing the Net Operating Income by
the purchase price or current market value. Here, $85,000 divided by $1,000,000 equals
, 0.085, or 8.5%. This metric allows investors to compare the relative value of different real
estate investments on an unleveraged basis.
4. A commercial property has a depreciable basis of $2,500,000. According to current US tax
law for non-residential real property, what is the annual depreciation deduction using the
straight-line method?
A. $90,909
B. $60,976
C. $64,103
D. $72,464
Correct Answer: C
Explanation: Non-residential commercial property is depreciated over a 39-year recovery
period. By dividing the $2,500,000 basis by 39, we arrive at an annual depreciation
deduction of approximately $64,103. Note that residential rental property uses a 27.5-year
period, which is a key distinction in real estate tax analysis.
5. Which of the following best describes the ‘Internal Rate of Return’ (IRR)?
A. The interest rate charged by the lender on a commercial mortgage.
B. The annual cash flow divided by the initial equity investment.
C. The total profit divided by the number of years the property is held.
D. The discount rate that makes the Net Present Value (NPV) equal to zero.
101 Financial Analysis | Actual Q&A with Rationale
(CCIM101 Financial Analysis Final Exam) | CCIM
Institute
1. An investor is evaluating a property with a Potential Gross Income (PGI) of $200,000, a
vacancy and collection loss of 5%, and operating expenses totaling $70,000. What is the Net
Operating Income (NOI)?
A. $130,000
B. $120,000
C. $190,000
D. $125,000
Correct Answer: B
Explanation: To calculate the Net Operating Income, first subtract the vacancy loss from
the PGI to find the Effective Gross Income (EGI). In this case, $200,000 minus 5% ($10,000)
equals $190,000. Finally, subtracting the $70,000 in operating expenses results in an NOI of
$120,000.
2. Select all of the following items that are considered operating expenses when calculating
Net Operating Income (NOI). (Select All That Apply)
A. Property Taxes
B. Debt Service (Mortgage Payments)
,C. Property Insurance
D. Income Tax Liability
E. Utilities
F. Property Management Fees
Correct Answer: ACEF
Explanation: Operating expenses include costs necessary to maintain and operate the
property, such as taxes, insurance, utilities, and management fees. Debt service is a
financing cost, and income tax is a personal or corporate liability, neither of which are
deducted to reach NOI. Correct identification of these expenses is vital for accurate
property valuation and cap rate analysis.
3. If an investor purchases a property for $1,000,000 with an annual Net Operating Income
(NOI) of $85,000, what is the Capitalization Rate (Cap Rate)?
A. 7.5%
B. 9.0%
C. 11.7%
D. 8.5%
Correct Answer: D
Explanation: The Capitalization Rate is calculated by dividing the Net Operating Income by
the purchase price or current market value. Here, $85,000 divided by $1,000,000 equals
, 0.085, or 8.5%. This metric allows investors to compare the relative value of different real
estate investments on an unleveraged basis.
4. A commercial property has a depreciable basis of $2,500,000. According to current US tax
law for non-residential real property, what is the annual depreciation deduction using the
straight-line method?
A. $90,909
B. $60,976
C. $64,103
D. $72,464
Correct Answer: C
Explanation: Non-residential commercial property is depreciated over a 39-year recovery
period. By dividing the $2,500,000 basis by 39, we arrive at an annual depreciation
deduction of approximately $64,103. Note that residential rental property uses a 27.5-year
period, which is a key distinction in real estate tax analysis.
5. Which of the following best describes the ‘Internal Rate of Return’ (IRR)?
A. The interest rate charged by the lender on a commercial mortgage.
B. The annual cash flow divided by the initial equity investment.
C. The total profit divided by the number of years the property is held.
D. The discount rate that makes the Net Present Value (NPV) equal to zero.
