RPA Property Valuation Principles & Methods 5

Question 1

The discounted cash flow (DCF) method differs from direct capitalization primarily because DCF:

Accepted Answer

Analyzes variable income and expenses over a projection period and discounts them to present value

Answer

DCF models projected income and expenses year-by-year over a holding period and discounts all cash flows—including the reversion—back to present value using a yield rate.

Question 2

Which of the following land valuation techniques is most appropriate when comparable land sales are unavailable but the property produces income?

Accepted Answer

Land residual technique

Answer

The land residual technique isolates income attributable to land by subtracting income attributable to improvements from total NOI, then capitalizing the residual—useful when direct land sales are lacking.

Question 3

An appraiser uses the sales comparison approach and brackets the subject with comparables that are both superior and inferior. The primary purpose of bracketing is to:

Accepted Answer

Demonstrate that the value conclusion falls within a supportable range

Answer

Bracketing ensures the subject's value is supported by comparables on both sides of the adjustment spectrum, strengthening the credibility of the final value conclusion.

Question 4

In the cost approach, what is the formula for estimating the value of improved property?

Accepted Answer

Land Value + Reproduction Cost New − Accrued Depreciation

Answer

Cost Approach Value = Land Value + Reproduction (or Replacement) Cost New of Improvements − Accrued Depreciation.

Question 5

The principle of conformity suggests that property values are maximized when:

Accepted Answer

Land uses and improvements are compatible and reasonably homogeneous

Answer

The principle of conformity holds that reasonable homogeneity in land use supports and stabilizes property values within a neighborhood.

(RPA) Real Property Appraiser Certification Practice Test

(RPA) Real Property Appraiser Certification Practice Test

RPA Property Valuation Principles & Methods 5