CCIM 101 FINANCIAL ANALYSIS
PROFESSIONAL EXAM PREP
QUESTIONS & VERIFIED ANSWERS
2026/2027 UPDATE
1. An investor analyzes a property with a Net Operating Income (NOI) of $120,000. The
market cap rate is 6%. If the investor requires a 12% Internal Rate of Return (IRR) and expects
3% annual growth in NOI, what is the maximum price they should pay today using the Gordon
Growth Model approach?
A. $1,000,000
B. $1,333,333
C. $1,500,000
D. $2,000,000
Answer: B
Conceptual Explanation: Using the Gordon Growth Model (V = NOI / (r - g)), where r is
the required return (12%) and g is the growth rate (3%). V = $120,000 / (0.12 - 0.03) =
$120,.09 = $1,333,333.
2. Which of the following scenarios describes ‘Negative Leverage’?
A. The Cost of Debt is lower than the Free-and-Clear Rate of Return (Cap Rate).
,B. The Loan-to-Value (LTV) ratio exceeds 80%.
C. The Annual Debt Service (ADS) is greater than the Net Operating Income (NOI).
D. The Equity Dividend Rate (Cash-on-Cash) is lower than the Overall Capitalization Rate.
Answer: D
Conceptual Explanation: Negative leverage occurs when the cost of borrowing (debt
constant) is higher than the cap rate, which pulls the cash-on-cash return below the cap
rate.
3. When calculating the Adjusted Basis for tax purposes, which of the following is NOT added
to the original cost basis?
A. Routine maintenance and repair costs.
B. Capital improvements made during ownership.
C. Legal fees associated with the acquisition.
D. Recording fees paid at closing.
Answer: A
Conceptual Explanation: Routine maintenance and repairs are operating expenses and
are deducted in the year they occur; they do not increase the capital basis of the property.
4. A commercial property is purchased for $2,500,000 with a 75% LTV loan at 5% interest over
25 years. If the NOI is $180,000, what is the Debt Service Coverage Ratio (DSCR)?
A. 1.28
, B. 1.52
C. 1.37
D. 1.15
Answer: C
Conceptual Explanation: Loan amount = $2.5M * 0.75 = $1,875,000. Annual Debt Service
(ADS) for a $1.875M loan at 5% for 25 years is approximately $131,533. DSCR = NOI / ADS
= $180,000 / $131,533 = 1.368, rounded to 1.37.
5. If the Net Present Value (NPV) of an investment is zero at a discount rate of 10%, what can
be concluded about the Internal Rate of Return (IRR)?
A. The IRR is exactly 10%.
B. The IRR is less than 10%.
C. The IRR is greater than 10%.
D. The IRR cannot be determined from this information.
Answer: A
Conceptual Explanation: By definition, the IRR is the discount rate that makes the NPV of
all cash flows from a project equal to zero.
6. In the CCIM Cash Flow Model, how is the Before-Tax Cash Flow (BTCF) calculated?
A. NOI minus Annual Debt Service
B. NOI minus Income Taxes
PROFESSIONAL EXAM PREP
QUESTIONS & VERIFIED ANSWERS
2026/2027 UPDATE
1. An investor analyzes a property with a Net Operating Income (NOI) of $120,000. The
market cap rate is 6%. If the investor requires a 12% Internal Rate of Return (IRR) and expects
3% annual growth in NOI, what is the maximum price they should pay today using the Gordon
Growth Model approach?
A. $1,000,000
B. $1,333,333
C. $1,500,000
D. $2,000,000
Answer: B
Conceptual Explanation: Using the Gordon Growth Model (V = NOI / (r - g)), where r is
the required return (12%) and g is the growth rate (3%). V = $120,000 / (0.12 - 0.03) =
$120,.09 = $1,333,333.
2. Which of the following scenarios describes ‘Negative Leverage’?
A. The Cost of Debt is lower than the Free-and-Clear Rate of Return (Cap Rate).
,B. The Loan-to-Value (LTV) ratio exceeds 80%.
C. The Annual Debt Service (ADS) is greater than the Net Operating Income (NOI).
D. The Equity Dividend Rate (Cash-on-Cash) is lower than the Overall Capitalization Rate.
Answer: D
Conceptual Explanation: Negative leverage occurs when the cost of borrowing (debt
constant) is higher than the cap rate, which pulls the cash-on-cash return below the cap
rate.
3. When calculating the Adjusted Basis for tax purposes, which of the following is NOT added
to the original cost basis?
A. Routine maintenance and repair costs.
B. Capital improvements made during ownership.
C. Legal fees associated with the acquisition.
D. Recording fees paid at closing.
Answer: A
Conceptual Explanation: Routine maintenance and repairs are operating expenses and
are deducted in the year they occur; they do not increase the capital basis of the property.
4. A commercial property is purchased for $2,500,000 with a 75% LTV loan at 5% interest over
25 years. If the NOI is $180,000, what is the Debt Service Coverage Ratio (DSCR)?
A. 1.28
, B. 1.52
C. 1.37
D. 1.15
Answer: C
Conceptual Explanation: Loan amount = $2.5M * 0.75 = $1,875,000. Annual Debt Service
(ADS) for a $1.875M loan at 5% for 25 years is approximately $131,533. DSCR = NOI / ADS
= $180,000 / $131,533 = 1.368, rounded to 1.37.
5. If the Net Present Value (NPV) of an investment is zero at a discount rate of 10%, what can
be concluded about the Internal Rate of Return (IRR)?
A. The IRR is exactly 10%.
B. The IRR is less than 10%.
C. The IRR is greater than 10%.
D. The IRR cannot be determined from this information.
Answer: A
Conceptual Explanation: By definition, the IRR is the discount rate that makes the NPV of
all cash flows from a project equal to zero.
6. In the CCIM Cash Flow Model, how is the Before-Tax Cash Flow (BTCF) calculated?
A. NOI minus Annual Debt Service
B. NOI minus Income Taxes
