AGEC 432 Final (Exam 1 & 2) questions
and answers graded A+ passed
(T or F) The equity value can be estimated by subtracting debt service from net operating
income and dividing this amount by the equity dividend rate. - correct answer ✔✔True
(T or F) A building has 12 foot ceilings that cause the electric bill to be $1,200 higher per year.
Depreciation caused by ceilings can be estimated by calculating the present value of the $1,200
per year over the remaining economic life of the building. - correct answer ✔✔True
Which of the following is true concerning capitalization rates? - correct answer ✔✔It expresses
relationships between income and property value at a specific point in time
Direct costs include - correct answer ✔✔Direct labor, direct costs and materials, wages
Which of the following factors is NOT part of the definition of market value? - correct answer
✔✔The property has been on the open market for less than a year
Lease where the tenant pays the operating expenses - correct answer ✔✔Net Rental Lease
(T or F) The capitalization rate for a leased fee estate should always be lower than the
capitalization rate for a fee simple estate. - correct answer ✔✔False
(T or F) Economic obsolescence is the loss of value caused by inefficient layout of technological
changes. - correct answer ✔✔False
, Which is not normally considered when conducting an appraisal using the cost approach? -
correct answer ✔✔Capitalization rate
Physical curable depreciation is a component of physical deterioration and is also known as
what? - correct answer ✔✔Deferred maintenance
Which of the following steps normally would be used in the cost approach to value? - correct
answer ✔✔Subtract accrued depreciation from the replacement cost
What does an appraisal tell about the value of a property? - correct answer ✔✔An appraisal
estimates value
Which of the following expenses would NOT be included in an operating statement used to
calculate net operating income in the income approach to value? - correct answer ✔✔Capital
additions
(T or F) Return on investment and change in net operating income are essential factors for cost
analysis. - correct answer ✔✔False
Which Approach has good accuracy if it involves many sales of bare land, and also is accurate
regarding replacement and depreciation costs? - correct answer ✔✔Cost Approach
(T or F) The premise by which an appraiser can use the cost approach is that a buyer will not pay
more for a property than the cost of constructing an equally desirable substitute, minus
depreciation. - correct answer ✔✔True
(T or F) Effective Gross Income is the portion of income that remains after an allowance has
been made for vacancy and collection loss. - correct answer ✔✔True
and answers graded A+ passed
(T or F) The equity value can be estimated by subtracting debt service from net operating
income and dividing this amount by the equity dividend rate. - correct answer ✔✔True
(T or F) A building has 12 foot ceilings that cause the electric bill to be $1,200 higher per year.
Depreciation caused by ceilings can be estimated by calculating the present value of the $1,200
per year over the remaining economic life of the building. - correct answer ✔✔True
Which of the following is true concerning capitalization rates? - correct answer ✔✔It expresses
relationships between income and property value at a specific point in time
Direct costs include - correct answer ✔✔Direct labor, direct costs and materials, wages
Which of the following factors is NOT part of the definition of market value? - correct answer
✔✔The property has been on the open market for less than a year
Lease where the tenant pays the operating expenses - correct answer ✔✔Net Rental Lease
(T or F) The capitalization rate for a leased fee estate should always be lower than the
capitalization rate for a fee simple estate. - correct answer ✔✔False
(T or F) Economic obsolescence is the loss of value caused by inefficient layout of technological
changes. - correct answer ✔✔False
, Which is not normally considered when conducting an appraisal using the cost approach? -
correct answer ✔✔Capitalization rate
Physical curable depreciation is a component of physical deterioration and is also known as
what? - correct answer ✔✔Deferred maintenance
Which of the following steps normally would be used in the cost approach to value? - correct
answer ✔✔Subtract accrued depreciation from the replacement cost
What does an appraisal tell about the value of a property? - correct answer ✔✔An appraisal
estimates value
Which of the following expenses would NOT be included in an operating statement used to
calculate net operating income in the income approach to value? - correct answer ✔✔Capital
additions
(T or F) Return on investment and change in net operating income are essential factors for cost
analysis. - correct answer ✔✔False
Which Approach has good accuracy if it involves many sales of bare land, and also is accurate
regarding replacement and depreciation costs? - correct answer ✔✔Cost Approach
(T or F) The premise by which an appraiser can use the cost approach is that a buyer will not pay
more for a property than the cost of constructing an equally desirable substitute, minus
depreciation. - correct answer ✔✔True
(T or F) Effective Gross Income is the portion of income that remains after an allowance has
been made for vacancy and collection loss. - correct answer ✔✔True
