Relyon Softech Interview Questions and Answers

I would prefer a lower cap rate as it indicates higher potential returns on investment.

• Lower cap rate implies higher potential returns on investment

• Higher cap rate may indicate higher risk or lower potential returns

• Investors typically prefer lower cap rates for safer investments

• Example: A cap rate of 5% may be preferred over a cap rate of 10%

WACC stands for Weighted Average Cost of Capital and is used to determine the minimum return a company must earn on their investments to satisfy their shareholders and debt holders.

• WACC is calculated by taking the weighted average of the cost of equity and the cost of debt, with each component weighted by its respective proportion in the company's capital structure.

• In Real Estate, WACC is used to evaluate the feasibility of real estate projects by comparing the expected retur...read more

Cash on cash returns are calculated by dividing the annual pre-tax cash flow by the initial investment.

• Calculate the annual pre-tax cash flow from the investment property.

• Divide the annual pre-tax cash flow by the initial investment amount.

• Express the result as a percentage to get the cash on cash return.

• Formula: Cash on Cash Return = (Annual Pre-tax Cash Flow / Initial Investment) * 100%

Calculating IRR for a word problem

• Identify the initial investment and cash flows over time

• Use a financial calculator or Excel to calculate the IRR

• IRR is the discount rate that makes the net present value of all cash flows equal to zero

Unlevered IRR is the internal rate of return without considering debt, while levered IRR includes the impact of debt.

• Unlevered IRR is the return on an investment without taking into account the effects of debt financing.

• Levered IRR is the return on an investment that includes the impact of debt financing.

• Unlevered IRR is used to evaluate the return on an investment solely based on its own merits, while levered IRR considers the cost of debt and its impact on returns.

• For examp...read more