CFA Practice Question

There are 195 practice questions for this study session.

CFA Practice Question

Suppose the total reproduction cost of a building is $750,000, its effective age is 5 years, its total economic life is 30 years, the reproduction cost of short-lived curable items is $50,000, and the reproduction cost of the short-lived incurable items is $100,000. What is the total long-lived physical deterioration for this building?
A. 100,000.
B. 125,000.
C. 25,000.
Explanation: (750,000 - 150,000) x 5 / 30 = 100,000.

User Contributed Comments 4

User Comment
alejandroc Remove reproduction cost of other items before calculating per-year deterioration!
chau76 is this answer correct? wouldn't it be incurable= (750-50) x (5/30) = 116.67, total = curable + incurable, 50+116.67 = 166.67?
littlecow you have to remove the 100,000 too, chau76.
mtsimone •Repl Cost - Total Curable = Curable Repl Cost(CRC)

•CRC(Effective/Economic) = Incurable (what the question calls 'Long-Lived Physical Deterioration)

∴750k-150k = 600k and 600k(5/30) = 100k
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