 |
ITV521S - INTRODUCTION TO VALUATION - 1ST OPP - NOV 2023 |
|
|
1 Pages 1-10 |
▲back to top |
|
|
1.1 Page 1 |
▲back to top |
n Am I BI A u n IVER s ITY
OF SCIEnCE Ano TECHnOLOGY
FACULTYOF ENGINEERINGAND THE BUILTENVIRONMENT
DEPARTMENT OF LAND AND SPATIAL SCIENCES
QUALIFICATION(S): BACHELOR OF PROPERTYSTUDIES
DIPLOMA IN PROPERTYSTUDIES
BACHELOR OF LAND ADMINISTRATION
QUALIFICATION(S) CODE: 08BOPS
06DPRS
NQF LEVEL: 5
07BLAM
COURSE CODE: ITVS21S
COURSE NAME: INTRODUCTION TO VALUATION
EXAMS SESSION: NOVEMBER 2023
PAPER:
THEORY
DURATION:
3 HOURS
MARKS:
100
FIRSTOPPORTUNITYEXAMINATION QUESTION PAPER
EXAMINER(S) MR AMIN A. ISSA
MODERATOR: MR SAMUELATO K. HAYFORD
INSTRUCTIONS
1. Read the entire question paper before answering the Questions.
2. Please write clearly and legibly!
3. The question paper contains a total of 4 questions.
4. You must answer ALL QUESTIONS.
5. Make sure your Student Number is on the EXAMINATION BOOK(S).
PERMISSIBLEMATERIALS
1. Non-programmable Scientific Calculator
THIS QUESTION PAPER CONSISTS OF 12 PAGES {Including this front page)
|
|
1.2 Page 2 |
▲back to top |
Introduction to Valuation
Question 1
ITV5215
For each of the following statements indicate whether it is 'TRUE'or 'FALSE'.Each correct answer
carries 1 mark.
{25)
a) In order to have value, a good must possess at least one basic characteristic, namely scarcity.
b) Market price may be equated to cost in any given transaction.
c) A freehold is the outright ownership of a property and land on which it stands with no time
limit.
d) You need previous years' rental information when gathering information for a valuation using
the Cost Method of Valuation.
e) If a mother sells her house to her daughter, you expect the daughter to pay less than the
market value.
f) When either buyer or seller of a property needs to complete the transaction quickly, the
result may be a lower market price
g) To value properties like townhalls and schools, valuers rely heavily upon the income approach
to value.
h) A road built near a neighbourhood and also streetlights which never existed before will affect
the neighbourhood positively.
i) A large factory is being built close to a town. No new construction has begun on new housing
facilities. Demand for housing is up because of the factory construction and new factory jobs.
It is expected rent for dwelling space in that area will remain the same.
j) The formula for the Cost Method of valuation is: Reproduction or Replacement Cost of
improvements - Depreciation on improvements+ Site Value = Property Value.
First Opportunity Question Paper
Page 2 of 12
November 2023
|
|
1.3 Page 3 |
▲back to top |
Introduction to Valuation
ITV521S
k} Loss of jobs due to layoffs or closures may cause loss of value in property and is known as
external or economic obsolescence.
I} An arms-length transaction is where the buyer and seller know each other and act prudently.
m} A property sold at an auction because of a default in payment by a loan holder will not reflect
the market value of the property.
n) Interest paid on the accrued interest as well as the principal is called simple interest.
o} The location of a property can both increase and decrease its value.
p} The concept behind the Present Value of N$1 is that a person may accept to receive a lessen
sum now which could be invested to earn sufficient interest to ensure that by the time the
future is reached, the invested sum plus the interest earned would equal N$1.
q) One of the main characteristics of the property market is that it is disaggregated either on the
basis of geographical location, use or tenure.
r) A commercial building sells for N$300,000 and its rate of return or capitalization rate is 8
percent (8%). The net operating income (NOi} is thus calculated at N$24,500.
s} Opportunity cost is the return or other benefit foregone in pursuing one particular investment
opportunity rather than another.
t} A forced property buyer is someone who has to take the first property that comes along
although the property may be overpriced.
u} A buyer pays more for a property than for what it would otherwise sell if offered on the
market. They are aware that a new highway will soon be built in front of the property. It is
said the property has a hidden value.
First Opportunity Question Paper
Page 3 of 12
November 2023
|
|
1.4 Page 4 |
▲back to top |
Introduction to Valuation
ITV521S
v) A person sells a property for a low price because they are not knowledgeable of local market
conditions is known as uniformed buyer.
w) The size of a subject building is 119m2 while that of a comparable building is 130m 2. The
adjustment to be made is to add the difference between the two to the comparable building.
x) If the age of sale period of a comparable property is 5 months while the increment in value of
properties in general is 10% per annum, then the adjustment is 3.75%.
y) The Profits method of valuation is used to value profit generating properties that have either
a legal or factual monopoly.
[25]
Question 2
For each of the following questions chose the correct answer from the alternative answers
provided. Each correct answer carries 2 marks.
(30)
i) The concept behind the Present Value of N$1 is that a person may accept to receive a higher
sum now which could be invested to earn sufficient interest to ensure that by the time the
future is reached, the invested sum plus the interest earned would equal N$1.
A. False
B. True
C. Partially true
D. None of the above
First Opportunity Question Paper
Page 4 of 12
November 2023
|
|
1.5 Page 5 |
▲back to top |
Introduction to Valuation
ITV521S
ii) How much will N$10,000 be worth if it grows at 5% for 10 years with interest payable annually?
A. N$150,000
B. N$163,930
C. N$161,690
D. N$162,889
iii) lmaan invested N$10,000 at 6% on her 20th birthday, how much would she have on her 40th
birthday?
A. N$32,071.40
B. N$102,857.18
C. N$3,118.05
D. N$67,855.91
iv) Given that the amount of N$1 in 4 years @10% is 1.4641, The Present Value of N$1 in 4 years
@10%will be:
A. N$ 0.6830
B. N$ 2.1547
C. N$ 11.6025
D. N$ 0.9260
v) Calculate the present value of the right to receive N$100,000 receivable in 10 years' time
assuming a discount rate of 5%.
A. N$62,391
B. N$SO,OOO
C. N$61,391
D. None of the above
First Opportunity Question Paper
Page 5 of 12
November 2023
|
|
1.6 Page 6 |
▲back to top |
Introduction to Valuation
ITV521S
vi) Calculate the value of the right to receive N$100,000 receivable in five years' time assuming a
discount rate of 8%.
A. N$146,930
B. N$399,270
C. N$68,058
D. N$63,010
vii) Calculate the present value of the right to receive N$1,000 every year for ten years payable
annually in arrears assuming a discount rate of 5%
A. N$7,721.7
B. N$6,139.00
C. N$1,000
D. N$6932.1
viii) You estimate that costs of construction are N$2,000,000 now but you are not carrying them
out for another four years. If you estimate that building cost inflation will be 6% p.a., what will
they cost in four years' time?
A. N$2,400,000
B. N$2,524,953
C. N$2,423,239
D. N$2,426,543
ix) There are major repair works planned in 8 years' time for the entire industrial estate that you
hold in your investment portfolio. Assuming that you can invest money at an average rate of
return of 6% per annum, how much will accrue if you invest N$50,000 at the end of each year
for the next 8 years?
A. N$494,873.40
B. N$79,692.40
C. N$179,692.40
D. N$490, 783.36
First Opportunity Question Paper
Page 6 of 12
November 2023
|
|
1.7 Page 7 |
▲back to top |
Introduction to Valuation
ITV521S
x) Calculate the value of the right to receive N$100,000 receivable in five years' time assuming a
discount rate of 8%.
A. N$146,930
B. N$399,270
C. N$68,060
D. N$63,010
xi) Calculate the value of a property if the yield is 7% and the net income is N$200,000 per
annum.
A. N$2,400,000
B. N$2,524,953
C. N$2,423,239
D. N$2,857,142
xii) How much woul~ you receive in 4 years _ifyou invested N$5,000 every year at the end of the
year at 4% interest?
A. N$20,225
B. N$21,225
C. N$27,231
D. N$23,664
xiii) If a loan of $100,000 is taken out for a period of 25 years, then the constant annual amount required
to repay the loan together with interest at 9% per annum is:
A. N$10,180.63
B. N$9,180.63
C. N$10,900.00
D. N$11,180.63
First Opportunity Question Paper
Page7 of 12
November 2023
|
|
1.8 Page 8 |
▲back to top |
Introduction to Valuation
ITV521S
xiv) A buyer pays more for a property than for what it would otherwise sell if offered on the
market. They are aware that a new highway will soon be built in front of the property. It is
said the property has: -
A. Tangible value
B. Hidden value
C. Market Value
D. Investment value
xv) The net income of a property, divided by the value of a property, would provide the:
A. Depreciation rate
B. The rental rate
C. The capitalization rate
D. The cash flow rate
[30)
Question 3
For each of the following questions chose the correct answer from the alternative answers
provided. Eachcorrect answer carries 2 marks.
i) The owner of a large piece of land would like to sell it. Unfortunately, the land is located
adjacent to the city sewage treatment plant. The value of this property will be affected by the
incurable type of depreciation called: -
A. Physical deterioration
B. Functional obsolescence
C. External Obsolescence
D. Physical obsolescence
First Opportunity Question Paper
Page 8 of 12
November 2023
|
|
1.9 Page 9 |
▲back to top |
Introduction to Valuation
ITV521S
ii) Your subject property has one bathroom more than a possible comparable property. The
properties are very similar in all other ways. You could get an adjusted sale price more
representative of the market value for the subject property by:-
A. subtracting the depreciated value of an extra bath from the sale price of the comparable
B. adding the depreciated value of an extra bath from the sale price of the subject property
C. adding the depreciated value of an extra bath from the sale price of the comparable
D. none of the above
iii) The Valuation of cinema would typically be carried out using:
A. The residual approach
B. The profits approach
C. The cost approach
D. The insurance approach
iv) A valuation of a housing site would be carried out using:
A. The residual approach
B. The profits approach
C. The cost approach
D. The insurance approach
v) Valuations for insurance purposes are carried out using:
A. The residual approach
B. The profits approach
C. The cost approach
D. The insurance approach
vi) The valuation of a Government hospital would typically involve the use of:
A. The cost approach
B. The income approach
C. The residual approach
D. The hospital approach
First Opportunity Question Paper
Page 9 of 12
November 2023
|
|
1.10 Page 10 |
▲back to top |
Introduction to Valuation
vii) A freeholder has:
A. A lease on a property
B. Ownership of a property
C. Property without cost
D. The right to evict the tenant
ITV521S
viii) Suppose you have a possible comparable that is the same as the subject property except that
the comparable has a finished basement valued at N$43,000. You can derive a closer estimate
of the value of the subject property by:
A. adding N$43,000 to the sale price of the comparable
B. subtracting N$43,000 from the sale price of the comparable
C. using the comparable sale price as is
D. there is no need for comparison.
ix) A comparable property was sold 3 months ago at the price of N$900,000. If the sales price is
adjusted for time and the percentage increase overtime is 10% per year. What will the
adjusted sale price of the said comparable property be now? Answer is to be given to the
nearest decimal.
A. N$922,500
B. N$825,030
C. N$990,000
D. N$800,000
x) The Effective Gross Income of an income generating property is N$10,000,000. What is the
Net Operating Income of the property if the property management expenses are at 15% and
the other operating expenses are at 35%.
A. N$6,500,000
B. N$8,S00,000
C. N$5,000,000
D. N$15,000.000
First Opportunity Question Paper
Page 10 of 12
November 2023
|
|
2 Pages 11-20 |
▲back to top |
|
|
2.1 Page 11 |
▲back to top |
Introduction to Valuation
ITV521S
xi) The estimated replacement cost of a building is N$247,000. What is the Depreciated
replacement cost given that depreciation is at 25%.
A. N$61,750
B. N$123,500
C. N$308, 750
D. N$185,250
xii) The Replacement Cost New {RCN) of a property is N$960,000 and its depreciation is
N$240,000. Calculate the depreciation percentage.
A. 22%
B. 24%
C. 40%
D. 33%
xiii) A Freehold residential building as recently sold for N$SOO,OOOIf. it is rented at 70,000 per
annum. What is the yield (return)?
A.13%
B.14%
C. 14.5%
D. 12.5%
xiv) A comparable home has a value of $200,000. It has an extra bedroom compared to the
subject. The Valuer estimates this accounts for a $15,000 difference in value between the two
properties. The subject property has a larger garage, which is worth an extra $2,000 in value.
Considering these factors, what is the subject's adjusted property value?
A. 215,000
B. 185,000
C. 187,000
D. 202,000
First Opportunity Question Paper
Page 11 of 12
November 2023
|
|
2.2 Page 12 |
▲back to top |
Introduction to Valuation
ITV521S
xv) A residual valuation may be done for three main reasons:
A. To value a development site which a developer wants to acquire.
B. To determine expected profit from undertaking development where a site is already
owned by the developer.
C. To calculate a cost ceiling for construction where land has been acquired.
D. All of the above
(30)
Question 4
a) Explain in brief the following codes of measurements in valuation:
i) Gross External Area (GEA)
ii) Net Internal Area (NIA)
(4)
b) Highlight any eight (8) important contents of a good Valuation Report.
(4)
c) Why is a Deed an important source of market data to the valuer?
(4)
d) In squatter upgrading schemes, a valuer, in addition to assessing sale prices and land rent,
may be called upon to do other six (6) tasks. List the other tasks.
(3)
(15]
All the best of luck.
First Opportunity Question Paper
Page 12 of 12
November 2023