SOREV CREASAT MATHEMATICS

DIAGNOSTIC EXAMINATION

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DATE: ______________________________
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(Write the correct answer)
Question Nos.: 1 to 3 A building valued at P 50,000,000 has a net operating income of P 8,350,000. Land capitalization rate is
9% and the buildings estimated economic life is 20 yearscompute for the following:
1.

What is the residual income to the land?

a. P 1,350,000
b. P 4,500,000
c. P 3,850,000
d. P 70,000,000

2.

What is the value of the land?

a. P 4,500,000
b. P15,000,000
c. P9,642,850
d. P42,777,750

3.

What is the total value of the property?

a. P 54,500,000
b. P 65,000,000
c. P 59,642,850
d. P 92,777,750

4.

A property with an annual net operating income of P 336,000 was sold for P 4,200,000. The remaining life of the
building is 40 years. Land value is P 1,200,000. What is the value of the building?
a. P 3,000,000
b. P 2,000,000
c. P 2,500,000
d. P 3,375,000

5.

A comparable land was sold a year ago for P 30,000 per square meter. Its location is considered 15% inferior and its
shape and topography is 10% superior to the subject site. The time adjustment is 3% per year. Determine the adjusted
sale price of the comparable site.
a. P 29, 400 per square meter
b. P 32, 400 per square meter
c. P 30,600 per square meter
d. P 38,400 per square meter

CREASAT 2014 DIAGNOSTICS -- Income Approach

SOREV Education @ Quezon City (NCR) * Baguio City (North Luzon)

6.

A property with an annual net income of P 336,000 was sold for P 4,200,000. The remaining life of the building is 40
years. Land value is P 1,200,000. What is the overall rate for the property?
a. 6.00%
b. 7.00%
c. 8.00%
d. 9.00%

7.

What would be recapture rate of a building having a remaining economic life of 12 years
a. 112%
b. 88%
c. 8.33%
d. 8.00%

8.

A 30-year mortgage covering 75% of property value can be obtained from a bank for 8.5%. The mortgage constant is
0.092. Equity for this type of property requires 12% return. What is the Cap Rate?
a. 9.00%
b. 9.90%
c. 10.00%
d. 10.50%

9.

A 10-year-old building is currently valued at P 7,200,000. What was its original value if it has appreciated by 60% since
it was built?
a. P 4,320,000
b. P 2,880,000
c. P 4,500,000
d. P 5,142,900

10. The reproduction cost new of a commercial building is estimated to be P 80,000,000. The building should have an
economic life of 50 years, and it is now five years old. However, based on the observation of the appraiser its effective
age is similar to other 10-year-old building due to poor maintenance. What is the value of the building (exclusive of
land value)?
a. P 72,000,000
b. P 64,000,000
c. P 80,000,000
d. P 75,000,000
11. A building was constructed 10 years ago and is well-maintained that based on the observation of the appraiser its
condition is similar to other 6-year-old buildings. The actual age of the building is
a. 10 years
b. 4 years
c. 6 years
d. 16 years
12. Assume the following:
Annual net operating income of the property
: P 1,100,000
Land value
: P 4,500,000
Interest rate
: 8%
Recapture rate
: 4%
What is the property value by the building residual technique?
a. P 10,666,667
c. P 11,666,667
b. P 9,666,667
d. P 12,666,667

CREASAT 2014 DIAGNOSTICS -- Income Approach

SOREV Education @ Quezon City (NCR) * Baguio City (North Luzon)

13. If a propertys net income ratio is 0.80, what is its operating expense ratio?
a. 0.02
b. 2.0
c. 0.80
d. 0.20
Question Nos.: 14 & 15 An office building was recently sold for P60,000,000. Given the following information:
Gross potential income
: P12,000,000
Vacancy factor
: 10%
Expenses
: 45% of effective gross income
Annual mortgage payment
: P4,500,000
Equity
: P12,500,000
14. What is the equity dividend rate or cash-on-cash rate of return?
a. 7.48%
b. 12.00%
c. 11.52%
d. 7.50%
15. For the office building above and the same information, what is the over-all rate of return for the property?
a. 8.58%
b. 12.00%
c. 7.50%
d. 9.90%
16. A building that has an effective gross income of P500,000 and total operating expenses of P100,000 has what net
income ratio?
a) 0.80
b) 0.90
c) 1
d) 5
17. A building that has an effective gross income of P1,000,000 and total operating expenses of P300,000 has what
operating expense ratio?
a) 0.10
b) 0.15
c) 0.30
d) 0.25

18. A single-family residence that sold recently for P2,850,000 can be rented for P14,000per month. The propertys gross
rent multiplier is
a) 17
b) 204
c) 207
d) 210
19. If a particular buyer require a recapture of the building portion of the price in twenty (20) years, what is the indicated
recapture rate for the building?
a. 5%
b.10%
c. 20%
d. 2%
20. To adjust the sale price of a comparable sale with a ten (10%) percent better location you should
a. add 10% to the price
b. subtract 10% from the price
c. multiply the price by 10%
d. none of the above

CREASAT 2014 DIAGNOSTICS -- Income Approach

SOREV Education @ Quezon City (NCR) * Baguio City (North Luzon)

21. A property with an annual net income of P 280,000 was recently sold for P 3,500,000. The remaining economic life of
the property is estimated at 35 years. Land value is estimated to be P700,000. Compute the following:
a. The indicated rate of return as shown by the market place
b. The over-all rate
c. Value of the building
d. Ratio of the building to the total value
e. Recapture value of the building
22. An office building you are appraising was built on a land leased for 33 years at P 100,000 per month. The lease has 20
years more to go and land is currently valued at P 5,000,000. The gross rental of the office building is P 1,200,000 a
year. Vacancy and bad debts are estimated at 5% p.a. while annual expenses are janitorial services at P 20,000,
electricity and water at P 90,000, insurance P40,000, repair and maintenance at P60,000 and taxes P25,000.
Assuming that 8% per annum is a fair rate of interest and 33 years as a reasonable estimated of the economic life of the
building: Find the indicated value of the property by Income Approach.

23. What is the capitalization rate for a property that has an Effective Gross Income Multiplier (EGIM) of 8.0 and an
operating expense ratio of 40%?
a. 6.4%
b. 7.9%
c. 5%
d. 7.5%
24. The building value is 100,000. Net operating income is 20,000. Return on equity is 10%. The building has a 25 year life.
What is the total property value using the land residual technique?
a. 180,000
b. 100,000
c. 120,000
b. 160,000
25. The mortgage constant is 0.098762 and the LTV ratio is 80%. The overall capitalization rate is 12%. What is the equity
dividend rate?
a. 18.2%
b. 16.8%
c. 14.2%
d. 20.5%
26. What is the indicated capitalization rate if the annual debt service is 14,365, the LTV is 75%, the mortgage is 96,500,
and the equity dividend rate is 18%
a. 14.62%
b. 14.69%
c. 19.25%
d. 15.66%

CREASAT 2014 DIAGNOSTICS -- Income Approach

SOREV Education @ Quezon City (NCR) * Baguio City (North Luzon)