Q3. The best estimate for the real-estate project’s value is:

A)   1.92 billion euros.

B)   2.20 billion euros.

C)   1.84 billion euros.

Q4. What kind of transaction seems most suitable for:

              Belgarrique                  KinderWerks

A)    Venture capital                 Buyout

B)       Buyout                          Venture capital

C)    Venture capital                 Venture capital

Q5. To address his concerns about lower-than-expected profits and bankruptcy, Klios should:

A)   switch to a target IRR.

B)   adjust the discount rate.

C)   adjust the terminal value.

Q6. Based solely on the areas of concern Klios noted regarding the hedge-fund proposal, he is least likely to be worried about:

A)   investment risk.

B)   fraud risk.

C)   operational risk.

Q7. Assume you have estimated that a shopping center investment will provide a 3.5 percent appreciation-adjusted return, a 3 percent liquidity premium, and a one percent risk premium. If the prevailing rate on government bonds, net of real estate tax savings, is 6.25 percent, the capitalization rate determined using the built-up technique is closest to:

A)   13.75%.

B)   14.75%.

C)   14.00%.

Q8. Consider a real estate investment that is 35% debt financed and 65% equity financed. The total mortgage cost for this property is 10% and the cost of equity financing is at a recent high of 13%. The capitalization rate for this investment as determined using the band-of-investments method is closest to:

A)   11.80%.

B)   11.95%.

C)   12.85%.

Q9. When estimating a capitalization rate, which of the following methods is most appropriate for a real estate investment that is financed with both debt and equity?

A)   Built-up method.

B)   Comparable-sales method.

C)   Band-of-investments method.

Q10. Suppose you have collected the information in the table below for four comparable properties.

Using the market extraction method in conjunction with the direct capitalization valuation (C) approach, the market value (MV) for Property D is estimated to be closest to:

A)   $2,300,000.

B)   $2,309,237.

C)   $2,090,909.

Q11. Suppose you have collected the information in the table below for four comparable properties.

According to your analysis, real estate investments will generate a 2% appreciation-adjusted return on investment, have a 1.75% liquidity premium, and a 1.25% risk premium. The prevailing rate on government bonds, net of real estate tax savings, is 5%.

Using the built-up technique in conjunction with the direct income capitalization valuation technique, the estimated market value for Property D is closest to:

A)   $1,650,000.

B)   $1,300,000.

C)   $1,534,884.