ASC Investment Metrics 3

Question 1

A leveraged IRR is typically HIGHER than an unleveraged IRR when:

Accepted Answer

The cap rate exceeds the cost of debt (positive leverage)

Answer

Positive leverage occurs when the cap rate exceeds the loan interest rate, causing debt to amplify equity returns above the unleveraged IRR.

Question 2

In ARGUS Enterprise, the 'Yield on Cost' metric is calculated as:

Accepted Answer

Stabilized NOI divided by total project cost

Answer

Yield on Cost = Stabilized NOI ÷ Total Project Cost (including acquisition, renovation, and carry costs), used for value-add or development deals.

Question 3

When running a sensitivity analysis in ARGUS Enterprise, which combination of variables is most commonly tested for IRR sensitivity?

Accepted Answer

Exit cap rate and rent growth rate

Answer

Exit cap rate directly affects reversion proceeds while rent growth drives NOI trajectory — together they are the two dominant IRR sensitivities in most models.

Question 4

What is the 'Debt Yield' metric, and why do lenders use it?

Accepted Answer

Loan amount divided by NOI; measures the lender's return if they took the property back

Answer

Debt Yield = NOI ÷ Loan Amount; it measures the lender's yield if they foreclosed, providing a stress-test metric independent of cap rates or appraisals.

Question 5

In an ARGUS Enterprise cash flow projection, 'before-tax cash flow' is calculated as:

Accepted Answer

NOI minus Debt Service (principal + interest)

Answer

Before-tax cash flow (also called cash flow before taxes or CFBT) = NOI − Annual Debt Service, representing actual cash available to equity after loan payments.

(ASC) Argus Software Certification Practice Test

(ASC) Argus Software Certification Practice Test

ASC Investment Metrics 3