A house lacks a second bathroom. Adding one now would cost $14,000; including it during construction would have cost $9,000. What functional obsolescence does the deficiency represent?
Correct Answer
A) $5,000
Why this is correct: the obsolescence is the penalty for adding it late rather than the whole cost of adding it, because a bathroom built on time would have cost money too. Calculation: $14,000 - $9,000 = $5,000. Why the other choices are wrong: $14,000 charges the property for the entire addition; $9,000 is what it would have cost if no deficiency existed; $23,000 sums both figures.
Why This Is the Correct Answer
Why this is correct: the obsolescence is the penalty for adding it late rather than the whole cost of adding it, because a bathroom built on time would have cost money too. Calculation: $14,000 - $9,000 = $5,000. Why the other choices are wrong: $14,000 charges the property for the entire addition; $9,000 is what it would have cost if no deficiency existed; $23,000 sums both figures.
More Cost Approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
A warehouse cost $210,000 to build when the cost index stood at 105. The index is now 210. Its indicated current cost is:
The age-life method expresses depreciation as:
Market extraction of depreciation is limited by the fact that it:
Functional obsolescence caused by a deficiency is measured as curable when:
Curable physical deterioration is measured at cost to cure because:
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A house has three bedrooms sharing one bathroom, and adding a second bath is economically justified. This is:
Direct costs in a construction budget include:
An appraiser writes that a 40-year-old house has an effective age of 10 but describes original wiring, original kitchen and a 25-year-old roof. The report's problem is:
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