2. Real Estate Finance

Investment Analysis — Quiz

Test your understanding of investment analysis with 5 practice questions.

Practice Questions

Question 1

What is the primary objective of cash flow modelling in real estate investment analysis?

Question 2

An investor pays \100,000 today for a property yielding cash flows of \$30,000 at year 1, \$40,000 at year 2, and \$50,000 at year 3. Using a discount rate of 10\%, what is the net present value (NPV)?

Question 3

Which of the following is a key limitation of the internal rate of return (IRR) metric?

Question 4

In a sensitivity analysis, a 1 % increase in interest rate reduces NPV by \4,000, while a 1 % increase in vacancy rate reduces NPV by \$6,000. Which input is most sensitive?

Question 5

In scenario planning, best‐case NPV is \50,000 (probability 0.2), base‐case NPV is \20,000 (probability 0.6), and worst‐case NPV is \$10,000 (probability 0.2). What is the expected NPV?