An appraiser estimates that a dwelling has an effective age of 20 years and a remaining economic life of 25 years. What is its total economic life?
Correct Answer
D) 45 years
Total economic life=effective age+remaining life=20+25=45. Common errors: subtracting instead of adding gives 5 years; reporting the effective age gives 20 years; reporting the remaining life gives 25 years.
Why This Is the Correct Answer
Option D is correct because total economic life equals effective age plus remaining economic life: 20 + 25 = 45 years. The two parts together make up the whole life over which the improvements contribute value.
Why the Other Options Are Wrong
Option A: 5 years
Option A, 5 years, comes from subtracting instead of adding: 25 - 20 = 5. The identity adds effective age and remaining life, giving 20 + 25 = 45 years.
Option B: 20 years
Option B, 20 years, is just the effective age. Total economic life must also include the 25 years of remaining life, so it is 45 years.
Option C: 25 years
Option C, 25 years, is just the remaining economic life. Adding the 20-year effective age gives a total economic life of 45 years.
Used plus left equals whole
Effective age is the life used, remaining life is the life left, and together they make the whole life.
How to use: Use used plus left equals whole to solve for any one of the three life figures.
Exam Tip
If two of the three life figures are given, the third is found by simple addition or subtraction. Decide first which one is the whole.
Common Mistakes to Avoid
- -Subtracting the two life figures instead of adding them
- -Reporting one component as the total life
- -Using actual age in place of effective age
Concept Deep Dive
Analysis
This question tests the simple identity that links the parts of an improvement's economic life. Total economic life equals effective age plus remaining economic life. Plug in the two given figures and add them.
Background Knowledge
In the age-life model, effective age measures how much of the economic life has been used up, and remaining economic life measures what is left. Together they equal total economic life. Effective age is based on condition and utility, so it can differ from actual age.
Real-World Application
An appraiser judges that a house has an effective age of 20 years and that it should contribute value for about 25 more years. She records a total economic life of 45 years and uses that figure in her age-life depreciation estimate.
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