SAEE Cost Approach and Depreciation 2

Question 1

In the cost approach, which formula correctly states the value indication?

Accepted Answer

Land value + (cost new - depreciation)

Answer

Cost new + land value - appreciation

Answer

Replacement cost + accrued depreciation

Answer

Gross income x cap rate

Question 2

Reproduction cost differs from replacement cost in that reproduction cost estimates the cost to build:

Accepted Answer

An exact replica using the same materials and design

Answer

A functionally equivalent substitute

Answer

Only the land improvements

Answer

The structure at a future date

Question 3

Which cost-estimating method applies a price per square foot or cubic foot derived from similar buildings?

Accepted Answer

Comparative-unit method

Answer

Quantity survey method

Answer

Unit-in-place method

Answer

Index method

Question 4

An appraiser uses the original construction cost and adjusts it with a published multiplier. This is the:

Accepted Answer

Index method

Answer

Quantity survey method

Answer

Unit-in-place method

Answer

Sales comparison method

Question 5

The cost approach is generally considered MOST reliable for:

Accepted Answer

Special-purpose or newly built properties

Answer

Older homes with significant wear

Answer

Vacant agricultural land

Answer

Income-producing apartment complexes

Question 6

Which item is NOT typically included in direct (hard) costs?

Accepted Answer

Developer profit and financing

Answer

Building materials

Answer

Labor for construction

Answer

Contractor's on-site equipment

Question 7

Entrepreneurial incentive in the cost approach represents:

Accepted Answer

The expected reward motivating a developer to undertake a project

Answer

A penalty for construction delays

Answer

Depreciation of the land

Answer

The broker's commission