MCQ TEST
1. If Depreciation is increased by $10 and tax rate in economy is 40%. What is the key effect on Profit/Loss Statement?
Net Profit decreased by $10
Net Profit increased by $10
Net profit decreased by $6
No Effect
2. Investment 1 pays 20% interest compounded annually, Investment 2 pays 19.5% compounded every 6 months and
Investment 3 pays 19% with quarterly compounding. Which investment offers the highest returns?
Investment 1
Investment 2
Investment 3
Investment 1, 2 and 3 offer the same returns
3. (0.3) ²?
0.9
0.09
0.009
9
4. Detroit Industries would be paying the next dividend at $4 per share. Investors are asking for a 16% return from peers of
the company. The dividend increases annually by 6%. What is the assumed value of the stock today based on available
information?
&40
$42.4
$46.4
$44
5. If cost of Capital is less than IRR of the project?
NPV is Positive
NPV is Negative
NPV is zero
None of these
6. An Analyst who is interested in a company’s long-term solvency would most likely examine the?
Return on total capital.
Defensive interval ratio.
Fixed Charge Coverage Ratio
7. What is the most accurate rate of Compound?
Rule of 72
Rule of 70
Rule of 69
Rule of 71
8. Which of the following equations least accurately represents return on equity?
(Net profit margin) (equity turnover)
(Net profit margin) (total asset turnover) (assets/equity)
(ROA) (interest burden) (Tax retention rate)
9. What defines (symbolize) Abnormal Return & Risk?
α, β
β, α
σ, β
σ, α
10. A decrease in assets would lease likely be consistent with?
Increase in expenses.
Decrease in revenues.
Increase in Contributed capital
11. Increase in working capital will affect free cashflow to the firm in which way?
Increase
Decrease
No Effect
Cannot be determined
12. Which of the following statements about NPV and IRR is least accurate?
The IRR can be positive even if the NPV is negative
When the IRR is equal to the cost of capital, the NPV will be zero.
The NPV will be positive if the IRR is less than the cost of capital.
13. Who should get the promote in the Private Equity Structure?
LP
GP
None of the Above
14. Portfolio Diversification is least likely to protect against losses.
During Severe Market Turmoil
When markets are operating normally
When the portfolio securities have low return correlation.
15. Formula of DSCR?
Interest/EBIT
Interest/ Net Profit
Principal/ EBIT
(Principal + Interest)/ EBIT
16. Real estate markets differ from other asset classes by having all the following characteristics except:
Local market.
High transaction costs.
Segmented market.
Homogeneous Product
17. Ceteris Paribus, if there is rise in interest rate. What effect does it have in valuation of income generating assets?
Increase in value
Decrease in Value
No Effect
None of the Above
18. Property taxes are a major source of revenue for:
The federal government.
School districts.
Local governments.
State governments.
Both local government & school district
19. What is the Stock Price (as per GGM), if:
Do = $500
G = 5%
Re = 10%
$100
$500
$10,000
$10,500
20. Important supply factors affecting a city’s growth or growth potential include all the following except the:
Unemployment rate.
Business leadership.
Presence of any industry economies of scale.
Labor force characteristics.
Education system.
21. What’s more Dangerous?
Operating Leverage
Financial Leverage
Nothing is Dangerous
Both are Dangerous
22. Features of an office building that may be important to one market segment or another include:
Floor plate size.
Character and amount of parking.
Nature of other tenants.
Provision for electronics and communication systems.\
All of the above
23. Two properties have been sold twice within the last two years. Property A sold 22 months ago for $100,500; it sold last
week for $115,200. Property B sold 20 months ago for $105,000; it sold yesterday for $118,500. Assuming no compounding,
what is the average monthly rate of change in sale prices?
0.40%
4.20%
0.49%
0.42%.
24. Which of the following statements regarding capitalization rates on commercial real estate investments is the most
correct?
Cap rates vary inversely with the perceived risk of the investment
Cap rates vary positively with the perceived risk of the investment.
Cap rates tend to decrease when yields on long-term Treasury securities increase.
Cap rates tend to increase when the expected growth rate in net rental income increases.
25. If a landowner purchased a vacant lot six years ago for $93,450, assuming no income or holding costs during the interim
period, what price would the landowner need to receive today to yield a 10 percent annual return on the land investment?
$40,262.75.
$111,132.72.
$165,552.34
$194,843.56.
