Certified General Appraiser Exam - Questions with Verified Answers Estimated income property values will decline as a result of a. Increased net cash
... [Show More] flows b. Lower capitalization rates c. Lower vacancy rates d. Increased discount rates e. Higher standard of living Income capitalization is the term used to described the process of estimating the value of income property by studying expected future income. This process a. Converts the net operating income of a property into its equivalent capital value b. Reflects the time value of money by reducing or discounting future income to its present worth c. Focuses on the present worth of future benefits d. Uses market interest rates e. All of the above When estimating the value of an income producing property, the appraiser will not consider a. Income taxes attributable to the property b. The remaining economic life of the property c. Potential future income d. Net operating income e. Expected future income patterns In income capitalization, value is measured as the present worth of the a. Forecast reversion with a growth factor b. Forecast cash flow capitalized in perpetuity c. Forecast effective gross income (egi) plus the reversion d. Forecast net operating income plus the reversion e. Cost of production Income capitalization techniques are typically not used in valuing a. Retail properties b. Apartment buildings c. Office buildings d. Motels e. Single-family residences The lump sum that an investor receives upon resale of an investment is called a. Net income b. Gross income c. Equity dividend d. Reversion e. Residual The most commonly used capitalization rate is the a. Income rate b. Composite capitalization rate c. Interest rate d. Overall rate e. Underall rate An ordinary annuity is a. Level in amount and timing b. Different from a variable annuity c. Received at the end of each period d. A stream of income e. All of the above The procedure used to convert expected future benefits into present value is a. Redisual analysis b. Capitalization c. Market capitalization d. Equity capitalization e. Compounding A reconstructed operating statement for an owner-operated property should include a. Imcome tax b. Book depreciation c. Management charges d. Wages earned outside the property e. Imputed interest Yield is defined as a. Overall capitalization b. Stopping to review work c. Letting another speak first d. Rate of return on investment e. Rate of return of investment Which of the following is a specific expense item rather than a category? A. Replacement reserve b. Property taxes c. Operating expenses d. Fixed charges or expenses e. Variable expenses In yield capitalization, investor assumptions are a. Accrued b. Critiqued c. Regulated d. Questioned e. Simulated The basic formula for property valuation via income capitalization is a. V = ir b. V = i/r c. V = r/i d. V = sp/gr e. V = i/f All of the following consider the time value of money except a. Net present value b. Discounted cash flow c. Internal rate of return d. Payback period e. Compound interest A rent survey of apartment buildings reveals that one-bedroom units have a considerable higher occupancy factor than two-bedroom units. If the subject property contains only two-bedroom units, the appraisal should probably project a. An average of the vacancy factors for all units surveyed b. A higher vacancy factor than was found for one-bedroom units c. A lower vacancy factor than was found for one-bedroom units d. The same vacancy factor as was found for one-bedroom units e. Projection from the information provided is impossible. The quality of a forecast future income stream is indicated by its a. Amount b. Length c. Timing d. Mortgage e. Risk The total anticipated revenue from income property operations after vacancy and collection losses are deducted is a. Net operating income b. Before-tax cash flow c. Effective gross income d. Potential gross income e. Property residual income Which of the following is used in direct capitalization? A. Internal rate of return b. Overall capitalization rate c. Building capitalization rate d. Mortgage capitalization rate e. Equity yeild rate Which of the following statements is true? A. If the overall yield on the property is less than the mortgage rate, favorable leverage occurs. B. When negative leverage occurs, the owner receives a cash yield on the property that is greater than if the property were not financed. C. If the overall property yield equals the mortgage rate, the owner receives an additional yield on his investment by trading on the equity. D. Financing the property at higher rates of interest than the overall rate may not be beneficial to the owner in terms of yield on the equity investment. E. When a property generates cash flow, its owner pays tax on the money received. Which of the following statements is true? A. An investor usually considers the return from a property in the light of the risk being assumed. B. An investor who assumes higher risk usually expecrs lower investment yield. C. Higher-risk investments are generally associated with lower investment returns. D. To maximize the overall risk position, the investor may wish to diversify real and /or personal property investments. E. The lowest-risk investment is real estate. [Show Less]