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Real Estate Finance and Investments 13Th Edition Brueggeman Test Bank Full Chapter PDF
Real Estate Finance and Investments 13Th Edition Brueggeman Test Bank Full Chapter PDF
1. Which of the following factors is NOT part of the definition of market value?
3. Which of the following steps normally would be used in the cost approach to value?
5. A comparable property has a feature that is superior to the subject property. What adjustment
would be made in the sales comparison approach to value?
A. Value of the feature would be subtracted from the sales price of the comparable property
B. Value of the feature would be added to the sales price of the comparable property
C. Value of the feature would be subtracted from the value of the subject property
D. Value of the feature would be added to the value of the subject property
6. Given the following sales adjustment grid, what adjustment would be made for size?
A. $20 psf.
B. $40 psf.
C. $50 psf.
D. $35 psf.
7. Which of the following expenses would NOT be included in an operating statement used to
calculated net operating income in the income approach to value?
8. A property is sold for $200,000. Typical financing terms are an 85% loan with a 10% interest rate
over 15 years. If the before-tax cash flow is $2,000, what is the overall capitalization rate?
A. 10.96%
B. 11.96%
C. 19.13%
D. 9.96%
9. A property produces a first-year net operating income of $24,000. Because of the long economic
life of the building, the income is considered as a perpetuity that will grow by 2.5% per year. Using
a discount rate of 9.5%, estimate that property value.
A. $276,968
B. $252,632
C. $200,000
D. $342,857
10. A property is leased for $24,000 per year although market rents are currently $27,500 per year
and are expected to increase by 2% per year. The property is expected to be sold at the end of
year 10 based on a 10% terminal cap rate applied to the eleventh year NOI. The current lease on
the property will expire at the end of year 10 so the property can be leased in the eleventh year at
market rates. What is the value of the leased fee estate based on an 11.5% discount rate?
A. $362,489
B. $298,325
C. $251,298
D. $271,486
11. The discount rate is a rate that a typical investor would normally require as a(n) __________
return over investment holding period.
A. Maximum
B. Risk free
C. Expected
D. Historical
A. EGI
B. PGI
C. NOI
D. GIM
A. It is an IRR.
B. It explicitly considers projected future income and changes in property value over time
C. It expresses relationships between income and property value at a specific point in time
D. It is the rate of return that investors expect to earn on all capital invested
14. Capitalization rates will differ from yield rates when the income is expected to __________ over
time.
A. Functional obsolescence
B. Effective age
C. Capitalization rate
D. Replacement cost
A. A Above.
B. B Above.
C. C Above.
D. D Above.
17. When conducting an appraisal, only one of three approaches should be selected to determine the
property value.
True False
18. In the cost approach to value, land value can be estimated by comparing sales of vacant land that
are similar to the subject land.
True False
19. Economic obsolescence is the loss of value caused by inefficient layout of technological
changes.
True False
20. A building has 12 foot ceilings that cause the electric bill to be $1,200 higher per year.
Depreciation caused by the ceilings can be estimated by calculating the present value of the
$1,200 per year over the remaining economic life of building.
True False
21. A gross income multiplier can be calculated by dividing the gross income by the sales price.
True False
22. An overall capitalization rate can be calculated by dividing the net operating income by the
property value.
True False
23. The capitalization rate is equal to the discount rate minus any expected annual growth in income
and property value.
True False
24. A property is purchased for $350,000. Based on an annual growth rate of 3%, the resale value at
the end of year 10 would be $456,671.
True False
25. The capitalization rate for a leased fee estate should always be lower than the capitalization rate
for a fee simple estate.
True False
26. The equity value can be estimated by subtracting debt service from net operating income and
dividing this amount by the equity dividend rate.
True False
27. The market method or direct sales comparison method of estimating site value is not the most
reliable method available.
True False
28. Appraisers use bracketing in order to estimate the upper and lower range of value.
True False
29. Return on investment and change in net operating income are essential factors for cost analysis.
True False
30. Capitalization rate of newly constructed apartment building will be more than that of relatively old
apartment building, which is comparable in all other aspects.
True False
ch10 Key
1. Which of the following factors is NOT part of the definition of market value?
3. Which of the following steps normally would be used in the cost approach to value?
A. Value of the feature would be subtracted from the sales price of the comparable property
B. Value of the feature would be added to the sales price of the comparable property
C. Value of the feature would be subtracted from the value of the subject property
D. Value of the feature would be added to the value of the subject property
Brueggeman - Chapter 10 #5
6. Given the following sales adjustment grid, what adjustment would be made for size?
A. $20 psf.
B. $40 psf.
C. $50 psf.
D. $35 psf.
Brueggeman - Chapter 10 #6
7. Which of the following expenses would NOT be included in an operating statement used to
calculated net operating income in the income approach to value?
A. 10.96%
B. 11.96%
C. 19.13%
D. 9.96%
Brueggeman - Chapter 10 #8
9. A property produces a first-year net operating income of $24,000. Because of the long
economic life of the building, the income is considered as a perpetuity that will grow by 2.5%
per year. Using a discount rate of 9.5%, estimate that property value.
A. $276,968
B. $252,632
C. $200,000
D. $342,857
Brueggeman - Chapter 10 #9
10. A property is leased for $24,000 per year although market rents are currently $27,500 per year
and are expected to increase by 2% per year. The property is expected to be sold at the end of
year 10 based on a 10% terminal cap rate applied to the eleventh year NOI. The current lease
on the property will expire at the end of year 10 so the property can be leased in the eleventh
year at market rates. What is the value of the leased fee estate based on an 11.5% discount
rate?
A. $362,489
B. $298,325
C. $251,298
D. $271,486
Brueggeman - Chapter 10 #10
11. The discount rate is a rate that a typical investor would normally require as a(n) __________
return over investment holding period.
A. Maximum
B. Risk free
C. Expected
D. Historical
Brueggeman - Chapter 10 #11
12. Total possible income less any vacancy is __________.
A. EGI
B. PGI
C. NOI
D. GIM
Brueggeman - Chapter 10 #12
A. It is an IRR.
B. It explicitly considers projected future income and changes in property value over time
C. It expresses relationships between income and property value at a specific point in time
D. It is the rate of return that investors expect to earn on all capital invested
Brueggeman - Chapter 10 #13
14. Capitalization rates will differ from yield rates when the income is expected to __________
over time.
15. Which is not normally considered when conducting an appraisal using the cost approach?
A. Functional obsolescence
B. Effective age
C. Capitalization rate
D. Replacement cost
Brueggeman - Chapter 10 #15
16. Which lease has the lowest effective rent?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
Brueggeman - Chapter 10 #16
17. When conducting an appraisal, only one of three approaches should be selected to determine
the property value.
FALSE
Brueggeman - Chapter 10 #17
18. In the cost approach to value, land value can be estimated by comparing sales of vacant land
that are similar to the subject land.
TRUE
Brueggeman - Chapter 10 #18
19. Economic obsolescence is the loss of value caused by inefficient layout of technological
changes.
FALSE
Brueggeman - Chapter 10 #19
20. A building has 12 foot ceilings that cause the electric bill to be $1,200 higher per year.
Depreciation caused by the ceilings can be estimated by calculating the present value of the
$1,200 per year over the remaining economic life of building.
TRUE
Brueggeman - Chapter 10 #20
21. A gross income multiplier can be calculated by dividing the gross income by the sales price.
FALSE
Brueggeman - Chapter 10 #21
22. An overall capitalization rate can be calculated by dividing the net operating income by the
property value.
TRUE
Brueggeman - Chapter 10 #22
23. The capitalization rate is equal to the discount rate minus any expected annual growth in
income and property value.
TRUE
Brueggeman - Chapter 10 #23
24. A property is purchased for $350,000. Based on an annual growth rate of 3%, the resale value
at the end of year 10 would be $456,671.
FALSE
Brueggeman - Chapter 10 #24
25. The capitalization rate for a leased fee estate should always be lower than the capitalization
rate for a fee simple estate.
FALSE
Brueggeman - Chapter 10 #25
26. The equity value can be estimated by subtracting debt service from net operating income and
dividing this amount by the equity dividend rate.
TRUE
Brueggeman - Chapter 10 #26
27. The market method or direct sales comparison method of estimating site value is not the most
reliable method available.
FALSE
Brueggeman - Chapter 10 #27
28. Appraisers use bracketing in order to estimate the upper and lower range of value.
TRUE
Brueggeman - Chapter 10 #28
29. Return on investment and change in net operating income are essential factors for cost
analysis.
FALSE
Brueggeman - Chapter 10 #29
30. Capitalization rate of newly constructed apartment building will be more than that of relatively
old apartment building, which is comparable in all other aspects.
FALSE
Brueggeman - Chapter 10 #30
ch10 Summary
Category # of Questions
Brueggeman - Chapter 10 30
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