CGA Cost Approach 2

Question 1

When applying the cost approach, which type of depreciation arises from factors external to the property, such as proximity to a nuisance?

Accepted Answer

External obsolescence

Answer

External obsolescence stems from factors outside the property itself, like nearby industrial nuisances or neighborhood decline, and is generally incurable.

Question 2

An appraiser is estimating the cost of a building using the quantity survey method. What does this method involve?

Accepted Answer

Estimating costs for each component, trade, and material separately

Answer

The quantity survey method is the most detailed and accurate cost estimating technique, breaking down every component, labor, and material cost individually.

Question 3

Which statement best describes the 'unit-in-place' cost estimating method?

Accepted Answer

Costs are estimated per installed unit of each building component

Answer

The unit-in-place method estimates costs by applying a cost per installed unit (e.g., cost per square foot of roofing installed) for each building component.

Question 4

A 20-year-old warehouse has an effective age of 10 years due to excellent maintenance. Its total economic life is estimated at 50 years. What is the accrued depreciation percentage?

Accepted Answer

20%

Answer

Depreciation = Effective Age / Total Economic Life = 10/50 = 20%; effective age, not actual age, is used in this calculation.

Question 5

In the cost approach, 'entrepreneurial profit' (also called entrepreneurial incentive) represents:

Accepted Answer

The return required to attract a developer to undertake a project

Answer

Entrepreneurial profit (incentive) is the return required to motivate a developer to undertake a project and accept the risks involved.

(CGA) Certified General Appraiser Practice Test

(CGA) Certified General Appraiser Practice Test

CGA Cost Approach 2