The modified age-life method differs from the simple version by:
Correct Answer
A) Curing deferred maintenance first, then applying the ratio to the rest
Why this is correct: The governing concept is the modified age-life method, which refines the simple age-life method. It first deducts the cost to cure any deferred maintenance (curable physical deterioration) from the cost new. Then, the age-life ratio (Effective Age / Economic Life) is applied only to the remaining cost. Why the other choices are wrong: "Doubling the ratio for older buildings" is wrong; there is no standard rule to double the ratio. "Substituting the actual calendar age for the effective age in the ratio" is wrong; effective age is still used. "Skipping land value in the summation" is wrong; land value is handled separately in both methods. Exam tip: Modified age-life = (Cost New - Cost to Cure Curable Items) * (1 - (Effective Age / Economic Life)).
Why This Is the Correct Answer
Why this is correct: The governing concept is the modified age-life method, which refines the simple age-life method. It first deducts the cost to cure any deferred maintenance (curable physical deterioration) from the cost new. Then, the age-life ratio (Effective Age / Economic Life) is applied only to the remaining cost. Why the other choices are wrong: "Doubling the ratio for older buildings" is wrong; there is no standard rule to double the ratio. "Substituting the actual calendar age for the effective age in the ratio" is wrong; effective age is still used. "Skipping land value in the summation" is wrong; land value is handled separately in both methods. Exam tip: Modified age-life = (Cost New - Cost to Cure Curable Items) * (1 - (Effective Age / Economic Life)).
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:
A 2,050 sq ft dwelling is priced at $178 per square foot with a $34,000 detached garage and $21,500 of site improvements. Cost new is:
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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