Mastering DCF Analysis
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Questions and Answers

Which of the following best describes the acquisition cost of machinery for tax purposes?

  • The cost of purchasing the machinery only
  • The cost of purchasing the machinery plus brokerage, customs duties, and taxes
  • The cost of purchasing the machinery plus freight and insurance charges
  • The cost of purchasing the machinery plus transportation, handling, and installation fees (correct)

    • What does 'actual use' refer to in the context of property valuation?

  • The purpose for which the property is primarily used (correct)
  • The specific date of valuation
  • The assessment level set for the property
  • The basis for classifying and valuating the property

    • What is the definition of 'appraisal/valuation' in the context of property assessment?

  • The act or process of estimating the value of a property for a specific purpose (correct)
  • The conclusion resulting from a logical analysis of facts
  • The market value of a property as defined by the appraiser
  • The specific date of valuation for a property

    • Which approach to value considers the cost of acquiring land and building a new property with equal utility or adapting an old property to the same use with no undue cost due to delay?

    <p>Cost Approach</p> Signup and view all the answers

    What is the term used to describe the value remaining after deducting depreciation from the replacement cost?

    <p>Depreciated Value</p> Signup and view all the answers

    Which method of valuation involves comparing the property to similar properties that have sold recently?

    <p>Direct Comparison Approach</p> Signup and view all the answers

    What is the rate used to convert a future monetary sum into present value called?

    <p>Discount Rate</p> Signup and view all the answers

    Which method is used to find the implied or expected rate of return of a project in discounted cash flow analysis?

    <p>IRR</p> Signup and view all the answers

    What is the underlying assumption of the Investment Method in valuations?

    <p>Investors will pay no more for the subject asset than for another asset with a comparable income stream</p> Signup and view all the answers

    What are lands used to produce crops or forage for livestock and require the application of water other than natural rainfall called?

    <p>Irrigated Land</p> Signup and view all the answers

    What is the term used to refer to the manner of utilization, allocation, development, and management of land?

    <p>Land Use</p> Signup and view all the answers

    Which of the following is the correct definition of DCF analysis?

    <p>DCF analysis involves projecting periodic cash flows and applying a discount rate to determine the present value of an income stream associated with a property or business.</p> Signup and view all the answers

    What is the term used to describe a non-possessory interest in landed property conveying use, but not ownership, of a portion of that property?

    <p>Easement</p> Signup and view all the answers

    Which term refers to a loss in value due to factors outside the subject property?

    <p>External Obsolescence</p> Signup and view all the answers

    What is the procedure called where the value of land or improvements can be determined by deducting the value of a known component from the total sale price or value?

    <p>Extraction Method</p> Signup and view all the answers

    Which one of the following is the correct definition of 'Arm's Length Transaction'?

    <p>A transaction between unrelated parties that is freely arrived at in the open market</p> Signup and view all the answers

    What is the definition of 'Assessed Value'?

    <p>The market value of the real property multiplied by the assessment level</p> Signup and view all the answers

    What is the definition of 'Assessment'?

    <p>The act or process of estimating the value of a property</p> Signup and view all the answers

    What is the definition of 'Capitalization'?

    <p>The conversion of net income into the equivalent capital value</p> Signup and view all the answers

    Which one of the following is the correct definition of Goodwill?

    <p>An intangible asset based on the probability that customers will continue to resort to the same premises where the business is carried on under a particular name</p> Signup and view all the answers

    Which one of the following is the correct definition of Ground Lease?

    <p>A long-term lease that allows the lessee to improve or build on the land</p> Signup and view all the answers

    Which one of the following is the correct definition of Improvements?

    <p>Buildings, structures, or modifications to land intended to enhance the value or utility of the property</p> Signup and view all the answers

    Which one of the following is the correct definition of Income Multiplier or Years' Purchase?

    <p>The ratio between the sale price or value of a property and the average annual income or income expectancy</p> Signup and view all the answers

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