Three indications come in at $355,000, $362,000 and $358,000, weighted 50%, 20% and 30% in that order. What value is indicated?
Correct Answer
D) $357,300
Why this is correct: Calculation: ($355,000 x 0.50) + ($362,000 x 0.20) + ($358,000 x 0.30) = $177,500 + $72,400 + $107,400 = $357,300. Why the other choices are wrong: $358,333 is the unweighted mean; $357,900 applies the weights in reverse; $355,000 uses the most heavily weighted indication alone, which is not the same as weighting it at half.
Why This Is the Correct Answer
Why this is correct: Calculation: ($355,000 x 0.50) + ($362,000 x 0.20) + ($358,000 x 0.30) = $177,500 + $72,400 + $107,400 = $357,300. Why the other choices are wrong: $358,333 is the unweighted mean; $357,900 applies the weights in reverse; $355,000 uses the most heavily weighted indication alone, which is not the same as weighting it at half.
More Reconciliation Questions
Reconciliation of the approaches to value is best described as which activity?
Why should the reconciliation address the quantity of evidence as well as its quality?
How long must a report be retained compared with the workfile?
What distinguishes an appraisal review from an appraisal?
An appraiser reconciles to a value at the top of the indicated range because the client needs that figure. What has occurred?
What does it mean that a value opinion must be reasonable rather than merely arithmetically derived?
What should the reconciliation section explain to the reader?
How do the content obligations of the two report options differ with respect to the information analyzed?
The three approaches indicate $480,000, $495,000 and $610,000. What should the appraiser do first?
Three approaches indicate $1.02 million, $1.05 million and $1.04 million. How should this be reported?
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