Financial Analysis & Reporting Flashcards
7 cards from real CGA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis & Reporting flashcards as text
A property generates an annual NOI of $150,000 and similar properties sell at a 6.5% cap rate. What is the indicated value using direct capitalization?
Answer: $2,307,692
Value = NOI ÷ Cap Rate = $150,000 ÷ 0.065 = $2,307,692.
Which condition would cause an appraiser to prefer discounted cash flow (DCF) analysis over direct capitalization?
Answer: The property has significant lease expirations and variable near-term cash flows
DCF is preferred when income streams are irregular or changing, capturing the timing of cash flows that direct capitalization cannot reflect.
In a DCF analysis, the terminal value (reversion) is typically estimated by:
Answer: Capitalizing the projected NOI in the year after the holding period
The terminal value is found by capitalizing the NOI expected in the year following the holding period using a terminal (going-out) cap rate.
An appraiser increases the discount rate used in a DCF model. Holding all else constant, what happens to the estimated property value?
Answer: Value decreases because future cash flows are discounted more heavily
A higher discount rate reduces the present value of each future cash flow, resulting in a lower overall property value.
Which metric represents the total pre-tax return on equity over a holding period, expressed as a percentage of initial equity invested?
Answer: Equity Yield Rate (IRR on equity)
The equity yield rate (equity IRR) measures the annualized return on equity considering all cash flows and the reversion proceeds net of debt payoff.
A retail property has $600,000 in annual debt service and an NOI of $780,000. What is the Debt Coverage Ratio, and does it meet a typical lender minimum of 1.25?
Answer: 1.30 — Yes, it meets the threshold
DCR = $780,000 ÷ $600,000 = 1.30, which exceeds the common lender minimum of 1.25.
When preparing a financial analysis report, an appraiser notes that historical operating expenses appear unusually low. The most appropriate action is to:
Answer: Adjust expenses to market-typical levels and disclose the adjustment
Appraisers must normalize expenses to market-typical levels and clearly disclose any adjustments made to historical data.