Take Test: RCP Case Study Overview Quiz
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QUESTION 1
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Of the loan proposals presented on Exhibit B, without considering the
advisability of the risk level, which loan represents the higher risk?
Both loans are reasonable and of roughly equivalent risk even though
terms vary slightly
Loan A (Regions) is the higher risk loan
Loan B (National) is the higher risk loan
Neither loan presents any significant risk to the deal or its partners
since they are both non-recourse loans
In the RCP case study, what is the status of debt financing
arrangmennts?
Frank is actively looking for debt financing and is confident he can
achieve this.
Frank has made arrangements with a local bank for significant
financing, however it will require guarantees of the principals.
Frank has received two separate lending commitments to provide the
debt financing for the proposed acquisition.
Frank has chosen and fully negotiated a loan commitment, and has
made a good faith deposit showing clear intention to close this debt
arrangement.
QUESTION 3
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How much cash do the RCP partners intend to keep in reserve for day to
day expenses and/or emergencies with respect to this proposed
investment?
$50,000
$75,000
$100,000
Zero
QUESTION 4
Which of the statements below best states the decision currently being
considered in the case?
Frank is trying to choose between Loan A and Loan B and must
determine how the investor returns are affected. Higher leverage is
likely to allow the RCP partners to earn higher returns - but is it worth
the risk?
Frank knows he has a good deal and simply needs to document the
proposal and finish up the numbers to professionally present the deal
to his partners and potential investors.
Frank and RCP needs to remit $300,000 by Monday and he is worried
that his own RCP partners might pick his deal apart. Thus he needs a
bullet-proof analysis by Monday to get their approval before
proceeding to their equity partners.
Frank and his RCP partners know their $300,000 will go "at risk" on
Monday and also know they don't have the equity committed (though
they do have some interest). By Monday afternoon they must get to a
high confidence level that they can secure equity and close the deal.
QUESTION 5
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Frank has negotiated the purchase of an office building on behalf of the
group. How many tenants are there in this multi-tenant building?
Three
Five
Six
Ten
QUESTION 6
Historically RCP has put together a number of deals with their investor
group. They expect that they will be able to attract these same investors
again if they can show them a return on their money. Measured in IRR
terms, how much is that return?
8%
12
15%
30%
QUESTION 7
In the RCP case study, the RCP firm hopes to earn rights to cash flow
disproportionate to their capital investment and in addition to reasonable
fees they may obtain in their management role. Even though they are
only putting up a small amount of the capital, what percentage of the final
distributions are the RCP partners hoping for if things go exceedingly
well?
5%
15%
30%
50%
QUESTION 8
In the RCP Case study, RCP is looking to purchase an office building.
What is the current status of contract negotiations?
The property negotiations are underway, but nothing has been signed
yet.
The seller (developer) has approved the deal and is waiting for the
lender to sign off.
The purchase contract is signed and "in the title company" with
earnest money. The "inspection period" is still in force.
The purchase contract is signed and "in the title company" with
earnest money. The "inspection period" has passed and the parties
are moving towards closing.
QUESTION 9
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Frank Overton is the main character in this case study. Which of the
following terms best describes his title:
Financial Analyst
Principal
Student intern
3rd party advisor to RCP.
QUESTION 10
In the RCP Case study, what is the status of the proposed Equity
Financing requirement?
The equity is fully committed.
No equity is committed, but some of RCP's previous equity partners
have indicated an interest in participating.
No equity is committed and the deal has not yet been circulated to
potential funders, but Frank is confident they can meet the expected
requirements given past history
The equity is committed except for the final details as to how the
investors and RCP would share the profits.