Fin 590 Week 8 Final Exam Answers

FIN 590 Week 8 Final Exam Answers

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Question 1. 1. (TCOs B, C) The difference between the rate of return on assets and the cost of borrowing is: (Points : 5)

financial leverage

spread

debt service

none of the above

Question 2. 2. (TCO A) The investment decision process: (Points : 5)

is fundamentally the same for real estate investment analysis as for other investment areas

requires the investor to adjust expected cash flows for timing differences and risk

recognizes that investment assets are desired only for the benefits of ownership they bestow

all of the above are true

Question 3. 3. (TCO B) The revenue a property is expected to generate after adjusting for operating expenses but before providing for debt service or income tax consequences is: (Points : 5)

net operating income

effective gross income

normalized gross income

before-tax cash flow

Question 4. 4. (TCO H) Which of the following observations regarding demand for industrial space is untrue? (Points : 5)

Demand for industrial space is a derived demand.

Demand for industrial space is largely a function of the demand for products produced by the industrial sector.

Changes in demand for industrial space are more volatile than changes in demand for industrial goods.

Manufacturers generally adjust their space needs based on long-term projections of product demand

Question 5. 5. (TCO E) A real estate investment is available at an initial cash outlay of $10,000 and is expected to yield cash flows of $3,343.81 per year for five years. The internal rate of return is approximately: (Points : 5)

2%

20%

23%

17%

Question 6. 6. (TCO D) Potential disadvantages of the limited partnership include:...