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Basic Question 3 of 8
Which one of the following statements about the income approach to estimating a property's market value is false? The income approach:
B. uses the sales prices of properties that are similar to a subject property as the basic input variable.
C. views a property's value as the present value of all its future income.
D. ignores the effect of taxes on an investment.
A. assumes either a cash or an unleveraged purchase.
B. uses the sales prices of properties that are similar to a subject property as the basic input variable.
C. views a property's value as the present value of all its future income.
D. ignores the effect of taxes on an investment.
User Contributed Comments 8
| User | Comment |
|---|---|
| Prianka | Why is B false? |
| mordja | The sales price of comparable properties is used to determine the capitalisation rates on comparable properties which is an input into the formula. If it is not an input then it is the input of an input....drawing a long bow here. I do however agree with the other answers so it is probably the least true. |
| saltnvinegar | why is 'A' true?? |
| JimM | A is true because interest payments on any mortgage are ignored in the calculation. |
| udhay | why D is true,tax effect is considered in the income approach |
| hoyleng | B) is a sales comparison approach |
| Inaganti6 | @udhay NOI is different from NI. NI considers tax NOI doesn't. |
| 923029 | B is false because you could have bought the same property for half the price 10 years ago or today. Regardless of when you bought it ... the income approach values it going forward like the DCF for equities. |
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Learning Outcome Statements
explain the investment characteristics of real estate investments
CFA® 2024 Level I Curriculum, Volume 5, Module 4.