Three Gravity Forms Test - Real Estate Financial Modeling

1. In the capital structure for an investment, the sources of funds must always equal the uses of funds.*

True
False
It depends
Not enough information is given

2. If the annual growth rate for a $700,000 investment made at Time 0 is 6.00%, which of the following formulas would calculate its Future Value at the end of Year 8?*

=700000*8^(.04)
=700000^8
=700000*(1+.06)^7
=700000*(1+.06)^8

3. If a tenant has a triple net (NNN) lease, they are responsible for their pro-rata portion (as measured by their rentable square footage vs. that of the entire building) of which of the following?*

Real Estate Taxes
Maintenance
Utilities
All of the above

4. If the Total Equity Investment comprises 20.00% of a $100MM Purchase Price, and the Sponsor comprises 8.00% of the Total Equity Investment, how much would the Sponsor contribute towards the Purchase Price?*

$1,600,000
$24,000,000
$12,000,000
$1,200,000

5. What is the Year 2 Cash on Cash Return?*

7.55%
Not enough information provided
7.81%
7.00%

6. Which of Option 1 and Option 2 would yield the higher Net Present Value of Expected Values? Assume a cash investment of $1MM at Time 0. Option 1: a sale at the end of Year 3 for $2,000,000 with an Annual Discount Rate of 7%, OR Option 2: a sale at the end of Year 3 for $1,800,000 with an Annual Discount Rate of 4%?*

Option 1
Option 2
Both Options equal the same Net Present Value of Expected Values
Not enough information provided

7. What is the correct formula to use to backsolve into the Maximum Loan Amount using the Debt Service Coverage ratio test in cell G13?*

=-PV(D9/12,D10*12,D22)
=-PV(D9/12,D10,D22/12)
=-PV(D10/12,D9*12,D22/12)
=-PV(D10,D9/12,D22*12)

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