FREE ASA Market & Cost Approaches Questions and Answers

Question 1

Which approach uses recent sales of comparable properties to estimate value?

Accepted Answer

Market approach

Answer

Cost approach

Answer

Income approach

Answer

Replacement method

Question 2

What is the primary use of the cost approach?

Accepted Answer

To determine replacement cost minus depreciation

Answer

To compare income streams

Answer

To estimate rental value

Answer

To calculate resale value

Question 3

What type of depreciation is caused by outdated design or features?

Accepted Answer

Functional obsolescence

Answer

Physical deterioration

Answer

Economic obsolescence

Answer

Tax depreciation

Question 4

What is the first step in applying the cost approach?

Accepted Answer

Estimate replacement/reproduction cost

Answer

Calculate land value

Answer

Add depreciation

Answer

Analyze comparable sales

Question 5

Which of the following best describes the principle of substitution?

Accepted Answer

Substitution

Answer

Highest and best use

Answer

Anticipation

Answer

Conformity

Question 6

External factors such as market downturns cause what type of depreciation?

Accepted Answer

Economic obsolescence

Answer

Functional obsolescence

Answer

Physical wear and tear

Answer

Replacement depreciation