- CFA Exams
- CFA Level I Exam
- Study Session 15. Alternative Investments
- Reading 39. Private Real Estate Investments
- Subject 5. The cost and sales comparison approaches to valuation
CFA Practice Question
The HVAC system in a commercial office building has a useful life of 20 years and its replacement cost is $80,000. If the system is 15 years old, what is the incurable physical deterioration associated with this short-lived component?
B. $60,000.
C. Insufficient information.
A. $0.
B. $60,000.
C. Insufficient information.
Correct Answer: B
$80,000 x 15/20 = 60,000.
User Contributed Comments 3
| User | Comment |
|---|---|
| jjenkins7 | Why is this incurable? |
| sjne09 | incurable=(age/life)*(replacement cost-cost of curable phys. deterioration) |
| davidt87 | because 15 years of its life have already been used up. it's a measure of depreciation really |