CCIM 101 FINANCIAL ANALYSIS
MASTERY EXAM QUESTIONS &
VERIFIED ANSWERS 2026/2027 UPDATE
1. Which of the following best describes the reinvestment rate assumption inherent in the
Internal Rate of Return (IRR) calculation?
A. Positive cash flows are reinvested at the risk-free rate.
B. Positive cash flows are not reinvested, they are held as cash.
C. Positive cash flows are reinvested at the weighted average cost of capital.
D. Positive cash flows are reinvested at the internal rate of return itself.
Answer: D
Conceptual Explanation: The IRR mathematically assumes that all interim cash flows are
reinvested at the same rate as the IRR. This is a primary criticism of the metric, leading to
the use of MIRR (Modified Internal Rate of Return).
2. When calculating the Net Operating Income (NOI), which of the following expenses is
typically excluded?
A. Property management fees
B. Real estate taxes
C. Insurance premiums
,D. Debt service
Answer: D
Conceptual Explanation: NOI is an unleveraged figure. It represents the income generated
by the property before accounting for financing (debt service) and income taxes.
3. A property is purchased for $2,000,000 with a 75% LTV loan. If the annual debt service is
$120,000 and the NOI is $180,000, what is the Cash-on-Cash return?
A. 12.0%
B. 9.0%
C. 6.0%
D. 15.0%
Answer: A
Conceptual Explanation: Equity = $2,000,000 * (1 - 0.75) = $500,000. BTCF = NOI - Debt
Service = $180,000 - $120,000 = $60,000. Cash-on-Cash = $60,000 / $500,000 = 0.12 or
12%.
4. If the discount rate increases while all other variables remain constant, what happens to
the Net Present Value (NPV) of a real estate investment?
A. The NPV decreases.
B. The NPV increases.
C. The NPV remains unchanged.
, D. The NPV becomes equal to the IRR.
Answer: A
Conceptual Explanation: There is an inverse relationship between the discount rate and
the present value of future cash flows. A higher discount rate results in a lower NPV.
5. Which component is subtracted from Effective Gross Income (EGI) to arrive at Net
Operating Income (NOI)?
A. Vacancy and Collection Losses
B. Operating Expenses
C. Annual Debt Service
D. Depreciation Expense
Answer: B
Conceptual Explanation: NOI is calculated by subtracting Operating Expenses from
Effective Gross Income (EGI). Vacancy is subtracted from Potential Gross Income (PGI) to
get EGI.
6. In the context of commercial real estate taxation, what is the recovery period for a non-
residential income-producing property using straight-line depreciation?
A. 27.5 years
B. 39.0 years
C. 31.5 years
MASTERY EXAM QUESTIONS &
VERIFIED ANSWERS 2026/2027 UPDATE
1. Which of the following best describes the reinvestment rate assumption inherent in the
Internal Rate of Return (IRR) calculation?
A. Positive cash flows are reinvested at the risk-free rate.
B. Positive cash flows are not reinvested, they are held as cash.
C. Positive cash flows are reinvested at the weighted average cost of capital.
D. Positive cash flows are reinvested at the internal rate of return itself.
Answer: D
Conceptual Explanation: The IRR mathematically assumes that all interim cash flows are
reinvested at the same rate as the IRR. This is a primary criticism of the metric, leading to
the use of MIRR (Modified Internal Rate of Return).
2. When calculating the Net Operating Income (NOI), which of the following expenses is
typically excluded?
A. Property management fees
B. Real estate taxes
C. Insurance premiums
,D. Debt service
Answer: D
Conceptual Explanation: NOI is an unleveraged figure. It represents the income generated
by the property before accounting for financing (debt service) and income taxes.
3. A property is purchased for $2,000,000 with a 75% LTV loan. If the annual debt service is
$120,000 and the NOI is $180,000, what is the Cash-on-Cash return?
A. 12.0%
B. 9.0%
C. 6.0%
D. 15.0%
Answer: A
Conceptual Explanation: Equity = $2,000,000 * (1 - 0.75) = $500,000. BTCF = NOI - Debt
Service = $180,000 - $120,000 = $60,000. Cash-on-Cash = $60,000 / $500,000 = 0.12 or
12%.
4. If the discount rate increases while all other variables remain constant, what happens to
the Net Present Value (NPV) of a real estate investment?
A. The NPV decreases.
B. The NPV increases.
C. The NPV remains unchanged.
, D. The NPV becomes equal to the IRR.
Answer: A
Conceptual Explanation: There is an inverse relationship between the discount rate and
the present value of future cash flows. A higher discount rate results in a lower NPV.
5. Which component is subtracted from Effective Gross Income (EGI) to arrive at Net
Operating Income (NOI)?
A. Vacancy and Collection Losses
B. Operating Expenses
C. Annual Debt Service
D. Depreciation Expense
Answer: B
Conceptual Explanation: NOI is calculated by subtracting Operating Expenses from
Effective Gross Income (EGI). Vacancy is subtracted from Potential Gross Income (PGI) to
get EGI.
6. In the context of commercial real estate taxation, what is the recovery period for a non-
residential income-producing property using straight-line depreciation?
A. 27.5 years
B. 39.0 years
C. 31.5 years
