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LOS f, (Part 1): Calculate the net operating income (NOI) from a real estate investment.
Q1. All of the following variables might be factors when calculating the net operating income (NOI) for a property EXCEPT:
A) collection losses.
B) insurance.
C) depreciation.
Q2. An investor is considering purchasing an office building that is currently 95% leased.
Gross potential rental income $105,000
Insurance and taxes $9,000
Repairs and maintenance $15,000
Depreciation $11,000
What is the building's net operating income (NOI), based on the above table?
A) $64,750.
B) $75,750.
C) $81,000.
Q3. Johnson is considering the purchase of Happy Valley Acres, a 300-unit apartment complex. She has hired Carson, CFA, to advise her on the investment. Carson has estimated the following data for Happy Valley’s next accounting period:
- Potential rental income = $3.80 million.
- Vacancy rate = 3.5%.
- Insurance costs = $250,000.
- Financing costs = $940,000.
- Property taxes = $400,000.
- Utility expense = $120,000.
- Repair costs = $200,000.
- Depreciation = $350,000.
- Required return = 8%.
The property’s net operating income (NOI) and value should be closest to:
NOI Value
A) $2.70 million $33.75 million
B) $2.83 million $33.75 million
C) $2.70 million $21.60 million
Q4. The portfolio manager of a large real estate investment trust (REIT) has identified an office building as a potential investment. Based upon the following data, what is its net operating income (NOI)?
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Gross potential rental income |
$235,000 |
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Estimated vacancy and collection loss rate |
6% |
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Insurance and taxes |
$15,000 |
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Repairs and maintenance |
$17,000 |
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Utilities |
$12,500 |
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Cost of equity |
11% |
A) $150,550.
B) $176,400.
C) $190,500.
Q5. Net operating income (NOI) is calculated by subtracting which of the following from the property's gross potential rental income?
A) Depreciation.
B) Property taxes.
C) Income taxes.
Correct answer is B)
NOI does not consider income taxes, financing charges, or depreciation.
Q6. The income approach to valuing real estate is most similar to the following method of valuing common stock:
A) Dividend discount model with normal growth.
B) Dividend discount model with zero growth.
C) Price-to-sales ratio.
Q7. Based upon the following information, what is the net operating income (NOI) of the property?
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Estimated Market Value |
$600,000 |
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Capitalization Rate |
20% |
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Taxes |
$27,000 |
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Operating Expenses |
$107,000 |
A) $120,000.
B) $104,000.
C) $98,600.
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发表于 2009-2-28 16:30
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