CFA Practice Question

There are 139 practice questions for this study session.

CFA Practice Question

Which one of the following statements about the income approach to estimating a property's market value is false? The income approach:

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.
Correct Answer: B

User Contributed Comments 7

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.
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