ASC Evaluation Details and Structure 2

Question 1

In ARGUS DCF analysis, what does the 'reversion value' represent?

Accepted Answer

The estimated sale proceeds at the end of the holding period

Answer

The reversion value (also called terminal or residual value) is the estimated net sale proceeds received when the property is sold at the end of the analysis holding period.

Question 2

How is the terminal cap rate used differently from the going-in cap rate in ARGUS?

Accepted Answer

Going-in cap rate values the property at acquisition; terminal cap rate estimates the reversion value at the end of the holding period

Answer

The going-in cap rate determines the entry valuation, while the terminal cap rate is applied to the final year NOI (or year-after NOI) to estimate the property's sale price at the end of the holding period.

Question 3

Which ARGUS input most directly controls the length of the discounted cash flow projection?

Accepted Answer

Holding period (analysis period)

Answer

The holding period (analysis period) defines how many years of cash flows ARGUS projects before calculating the reversion value.

Question 4

When ARGUS calculates IRR, what two components of return does it combine?

Accepted Answer

Periodic cash flows during the holding period and the net reversion proceeds at sale

Answer

IRR in ARGUS reflects the time-weighted return from both the annual cash flows received during the hold and the net sale proceeds (reversion) at the end.

Question 5

In ARGUS, the going-in cap rate is applied to which cash flow metric to derive property value?

Accepted Answer

Net Operating Income (NOI)

Answer

Value = NOI ÷ Cap Rate; ARGUS applies the going-in cap rate to the stabilized or Year 1 NOI to derive the implied property value at acquisition.

(ASC) Argus Software Certification Practice Test

(ASC) Argus Software Certification Practice Test

ASC Evaluation Details and Structure 2