ASC ASC Sensitivity and Scenario Analysis 1 — Questions and Answers
Question 1: In ARGUS, a sensitivity analysis is primarily used to:
- Calculate the property's tax assessment value
- Measure how changes in key assumptions affect investment returns (Correct answer)
- Automate lease renewal probability calculations
- Determine individual tenant credit ratings
Correct answer: Measure how changes in key assumptions affect investment returns
Sensitivity analysis tests how variations in inputs like cap rate, rent growth, or vacancy affect output metrics such as IRR and NPV.
Question 2: Which output metric is most commonly tested in an ARGUS sensitivity analysis?
- Gross building area
- Lease expiration schedule
- IRR or NPV (Correct answer)
- Tenant improvement cost per square foot
Correct answer: IRR or NPV
IRR and NPV are the primary return metrics analyzed in sensitivity tables to understand investment risk across a range of assumptions.
Question 3: In ARGUS, a scenario differs from a simple sensitivity analysis in that:
- Scenarios only adjust a single variable at a time
- Scenarios allow multiple assumptions to change simultaneously under named conditions (Correct answer)
- Scenarios are limited to market rent adjustments only
- Scenarios cannot affect the hold period assumption
Correct answer: Scenarios allow multiple assumptions to change simultaneously under named conditions
Unlike single-variable sensitivity analysis, scenarios bundle multiple assumption changes into named cases (e.g., downside, upside) run simultaneously.
Question 4: What is a base case in ARGUS scenario modeling?
- The worst-case assumption set for stress testing
- The most likely expected outcome used as the benchmark (Correct answer)
- The minimum required return threshold for investment
- The initial acquisition price scenario
Correct answer: The most likely expected outcome used as the benchmark
The base case represents the most probable set of assumptions and serves as the reference point for comparing upside and downside scenarios.
Question 5: In ARGUS sensitivity analysis, varying the exit cap rate primarily affects:
- Annual rental income from in-place leases
- Operating expense reimbursements
- The reversion (sale) value of the property (Correct answer)
- Tenant improvement allowances
Correct answer: The reversion (sale) value of the property
The exit cap rate is applied to the terminal NOI to determine the property's sale price, making it a critical driver of reversion value.
Question 6: Which ARGUS feature allows you to display multiple scenario results side by side for comparison?
- Lease rollover report
- Scenario manager and comparison view (Correct answer)
- Expense reconciliation table
- Rent roll export function
Correct answer: Scenario manager and comparison view
ARGUS's scenario manager lets analysts run and compare multiple named scenarios (base, upside, downside) simultaneously in a single comparative view.
ASC ASC Sensitivity and Scenario Analysis 1
In ARGUS, a sensitivity analysis is primarily used to: