Alabama 60-Hour Real Estate Course Practice Exam

To determine the pre-tax cash flow of the property, you need to subtract the total expenses from the effective income. In this situation, the effective income is $180,000, and the expenses amount to $80,000.

The calculation is performed as follows:

Effective Income - Expenses = Pre-tax Cash Flow

So, $180,000 - $80,000 equals $100,000. This amount represents the cash that the property generates before accounting for any taxes, hence it is referred to as pre-tax cash flow.

In this scenario, the correct answer reflects the correct interpretation of the values presented. Understanding this relationship between income, expenses, and cash flow is essential when evaluating the financial performance of a property.