ASC Investment Metrics 5

Question 1

In ARGUS Enterprise, 'modified internal rate of return' (MIRR) differs from IRR because MIRR:

Accepted Answer

Assumes interim cash flows are reinvested at the cost of capital rather than the IRR

Answer

MIRR assumes interim positive cash flows are reinvested at the cost of capital (not the IRR itself), eliminating the reinvestment rate assumption problem inherent in standard IRR.

Question 2

When ARGUS Enterprise shows a negative NPV for a proposed acquisition, it indicates:

Accepted Answer

The projected returns fall short of the investor's required discount rate

Answer

A negative NPV means the PV of projected cash flows discounted at the required rate is less than the acquisition cost — the investment does not meet the return hurdle.

Question 3

Which of the following correctly describes the 'Loan-to-Value' (LTV) ratio as used in ARGUS Enterprise financing assumptions?

Accepted Answer

Loan amount divided by appraised or purchase price

Answer

LTV = Loan Amount ÷ Property Value (or purchase price); lenders use it to limit exposure relative to the asset's worth.

Question 4

In an ARGUS scenario analysis comparing a 'base case,' 'upside case,' and 'downside case,' what is the PRIMARY variable typically adjusted to define the downside case?

Accepted Answer

Market rent growth rate and exit cap rate

Answer

The downside case typically stresses lower rent growth and a higher exit cap rate simultaneously, as these two variables most severely compress both NOI and reversion value.

Question 5

A property's 'stabilized yield on cost' is 7.2% and market cap rates are 6.0%. This spread suggests:

Accepted Answer

The project creates value since stabilized yield exceeds market cap rate

Answer

A stabilized yield on cost above the market cap rate means the completed asset is worth more than it cost to create, representing a positive development or value-add spread.

(ASC) Argus Software Certification Practice Test

(ASC) Argus Software Certification Practice Test

ASC Investment Metrics 5