CCIM 101 FINANCIAL ANALYSIS EXAM
REVIEW QUESTIONS & VERIFIED
ANSWERS 2026/2027 UPDATE
1. Which of the following is the best definition of ‘Potential Gross Income’ (PGI) in the context
of commercial real estate?
A. The total revenue generated by a property after all operating expenses and debt service
are paid.
B. The maximum possible rental income a property could generate if it were 100%
occupied at market rents.
C. The income remaining after subtracting vacancy and collection losses from the total
scheduled rent.
D. The actual cash received from tenants during a specific accounting period.
Answer: B
Conceptual Explanation: PGI represents the total potential income from a property
assuming full occupancy and all rents are paid at market rates, before any losses or
expenses are considered.
2. If a property has a Net Operating Income (NOI) of $120,000 and the market capitalization
rate is 8%, what is the indicated value of the property?
A. $960,000
,B. $1,200,000
C. $1,500,000
D. $1,800,000
Answer: C
Conceptual Explanation: Value is calculated as NOI divided by the Cap Rate ($120,000 /
0.08 = $1,500,000).
3. What does the ‘Debt Service Coverage Ratio’ (DSCR) measure?
A. The property’s ability to cover its annual debt payments with its Net Operating Income.
B. The property’s ability to cover its operating expenses.
C. The ratio of the loan amount to the property value.
D. The percentage of the property owned by the equity investor.
Answer: A
Conceptual Explanation: DSCR is calculated as NOI divided by Annual Debt Service. It tells
lenders if the property generates enough income to pay the mortgage.
4. An investor requires a 12% internal rate of return (IRR). If the Net Present Value (NPV) of a
project is calculated to be $25,000 using a 12% discount rate, what can be concluded?
A. The project’s IRR is greater than 12%.
B. The project’s IRR is less than 12%.
, C. The project’s IRR is exactly 12%.
D. The project will result in a financial loss.
Answer: A
Conceptual Explanation: A positive NPV indicates that the project’s expected return
exceeds the discount rate used in the calculation.
5. Which of the following items is typically EXCLUDED from the calculation of Net Operating
Income (NOI)?
A. Property taxes
B. Debt service (mortgage payments)
C. Property management fees
D. Utilities paid by the landlord
Answer: B
Conceptual Explanation: NOI is an unleveraged figure, meaning it is calculated before
considering financing costs like debt service or income taxes.
6. What is the formula for calculating the ‘Cash-on-Cash Return’?
A. Before-Tax Cash Flow / Equity Investment
B. Net Operating Income / Total Investment
C. After-Tax Cash Flow / Loan Amount
REVIEW QUESTIONS & VERIFIED
ANSWERS 2026/2027 UPDATE
1. Which of the following is the best definition of ‘Potential Gross Income’ (PGI) in the context
of commercial real estate?
A. The total revenue generated by a property after all operating expenses and debt service
are paid.
B. The maximum possible rental income a property could generate if it were 100%
occupied at market rents.
C. The income remaining after subtracting vacancy and collection losses from the total
scheduled rent.
D. The actual cash received from tenants during a specific accounting period.
Answer: B
Conceptual Explanation: PGI represents the total potential income from a property
assuming full occupancy and all rents are paid at market rates, before any losses or
expenses are considered.
2. If a property has a Net Operating Income (NOI) of $120,000 and the market capitalization
rate is 8%, what is the indicated value of the property?
A. $960,000
,B. $1,200,000
C. $1,500,000
D. $1,800,000
Answer: C
Conceptual Explanation: Value is calculated as NOI divided by the Cap Rate ($120,000 /
0.08 = $1,500,000).
3. What does the ‘Debt Service Coverage Ratio’ (DSCR) measure?
A. The property’s ability to cover its annual debt payments with its Net Operating Income.
B. The property’s ability to cover its operating expenses.
C. The ratio of the loan amount to the property value.
D. The percentage of the property owned by the equity investor.
Answer: A
Conceptual Explanation: DSCR is calculated as NOI divided by Annual Debt Service. It tells
lenders if the property generates enough income to pay the mortgage.
4. An investor requires a 12% internal rate of return (IRR). If the Net Present Value (NPV) of a
project is calculated to be $25,000 using a 12% discount rate, what can be concluded?
A. The project’s IRR is greater than 12%.
B. The project’s IRR is less than 12%.
, C. The project’s IRR is exactly 12%.
D. The project will result in a financial loss.
Answer: A
Conceptual Explanation: A positive NPV indicates that the project’s expected return
exceeds the discount rate used in the calculation.
5. Which of the following items is typically EXCLUDED from the calculation of Net Operating
Income (NOI)?
A. Property taxes
B. Debt service (mortgage payments)
C. Property management fees
D. Utilities paid by the landlord
Answer: B
Conceptual Explanation: NOI is an unleveraged figure, meaning it is calculated before
considering financing costs like debt service or income taxes.
6. What is the formula for calculating the ‘Cash-on-Cash Return’?
A. Before-Tax Cash Flow / Equity Investment
B. Net Operating Income / Total Investment
C. After-Tax Cash Flow / Loan Amount
