CPM Asset Management and Investment Analysis

Question 1

Which metric represents the ratio of a property's net operating income to its total value or purchase price?

Accepted Answer

Capitalization rate

Answer

Cash-on-cash return

Answer

Internal rate of return

Answer

Gross rent multiplier

Question 2

Net Operating Income (NOI) is calculated by subtracting which of the following from effective gross income?

Accepted Answer

Operating expenses excluding debt service

Answer

Mortgage payments and depreciation

Answer

Capital expenditures and reserves

Answer

Vacancy losses and credit losses

Question 3

A property generates a potential gross income of $500,000 with a 5% vacancy rate. What is the effective gross income?

Accepted Answer

$475,000

Answer

$450,000

Answer

$495,000

Answer

$525,000

Question 4

Which approach to real estate valuation estimates value based on the income a property is expected to produce?

Accepted Answer

Income capitalization approach

Answer

Sales comparison approach

Answer

Cost approach

Answer

Replacement value approach

Question 5

What does a Debt Service Coverage Ratio (DSCR) of 1.25 indicate?

Accepted Answer

The property's NOI is 25% more than the annual debt service

Answer

The property generates 25% less income than needed to cover debt payments

Answer

The loan-to-value ratio is 125%

Answer

Operating expenses exceed income by 25%

Question 6

Which investment analysis tool accounts for the time value of money when evaluating a real estate investment?

Accepted Answer

Discounted cash flow analysis

Answer

Gross rent multiplier

Answer

Capitalization rate

Answer

Operating expense ratio

Question 7

In property asset management, what is the primary purpose of a capital reserve study?

Accepted Answer

To project future major repair and replacement costs

Answer

To determine current rental market rates

Answer

To calculate annual depreciation for tax purposes

Answer

To set the property's asking price for sale