ASC Investment Metrics 5

Question 1

In ARGUS Enterprise, 'modified internal rate of return' (MIRR) differs from IRR because MIRR:

Accepted Answer

Assumes interim cash flows are reinvested at the cost of capital rather than the IRR

Answer

Ignores the time value of money

Answer

Only accounts for levered cash flows

Answer

Uses nominal rather than real cash flows

Question 2

When ARGUS Enterprise shows a negative NPV for a proposed acquisition, it indicates:

Accepted Answer

The projected returns fall short of the investor's required discount rate

Answer

The property will produce negative NOI

Answer

The IRR is greater than the discount rate

Answer

The loan-to-value ratio is too high

Question 3

Which of the following correctly describes the 'Loan-to-Value' (LTV) ratio as used in ARGUS Enterprise financing assumptions?

Accepted Answer

Loan amount divided by appraised or purchase price

Answer

Annual debt service divided by NOI

Answer

Equity invested divided by total property value

Answer

Interest expense divided by gross potential income

Question 4

In an ARGUS scenario analysis comparing a 'base case,' 'upside case,' and 'downside case,' what is the PRIMARY variable typically adjusted to define the downside case?

Accepted Answer

Market rent growth rate and exit cap rate

Answer

Management fee percentage

Answer

Depreciation schedule

Answer

Loan amortization period

Question 5

A property's 'stabilized yield on cost' is 7.2% and market cap rates are 6.0%. This spread suggests:

Accepted Answer

The project creates value since stabilized yield exceeds market cap rate

Answer

The development or value-add project destroys value relative to buying stabilized

Answer

The project is at breakeven with no return premium

Answer

Market cap rates must rise before the project is viable

Question 6

In ARGUS Enterprise, 'Effective Gross Income' (EGI) is calculated as:

Accepted Answer

Gross Potential Income minus Vacancy and Credit Loss plus Miscellaneous Income

Answer

Gross Potential Income plus Capital Expenditures

Answer

NOI plus Operating Expenses

Answer

Scheduled Base Rent minus Tenant Improvements

Question 7

Which ARGUS Enterprise metric is most useful for comparing the relative risk of two properties with identical IRRs but different cash flow profiles?

Accepted Answer

Return of Capital Ratio (or payback period)

Answer

Going-in cap rate

Answer

Equity Multiple

Answer

Loan-to-Cost ratio