Seriously, how many times do I have to say it? It was the freaking Warehouse, and it has nothing to do with “intuition” on which one would conceptually depreciate faster. It was a simple calculation. The CFAI was trying to see if you know what the cap rate was, and what the meanings of the components were. It’s where the cap rate is HIGHER than the required rate of return. Cap rate = Required return - growth rate. Therefore, when the growth rate is NEGATIVE (which means there is depreciation), the cap rate is going to be higher than the required return. Seriously, I’ve answered this question on this board like 5 times now. It was warehouse, without a shadow of a doubt.
it was warehouse for sure, there are some uncertain answers out there but not this one
for the comp transaction, did anyone just multiple the ratio of the 3 given firms by the base company and then avg them out and then times by 1.3 the premium.?
i dont even remember a warehouse question
singlesong80 Wrote: ------------------------------------------------------- > for the comp transaction, did anyone just multiple > the ratio of the 3 given firms by the base company > and then avg them out and then times by 1.3 the > premium.? Nope the premium was included - it was a comp transaction, not a comparable analysis answer was 52 something
“for the comp transaction, did anyone just multiple the ratio of the 3 given firms by the base company and then avg them out and then times by 1.3 the premium.?” If you are talking about the gross income multiplier, the only thing that mattered was the one comparable company.
I put hotel as well for the most depreciation. Stalla has a somewhat similar question on the practice exam book and they claim that you get the most value for your money with a warehouse since the depreciation is minimal. And in my opinion it makes sense…why would a warehouse depreciate more than a hotel or an apartment building? I did not focus on the G at all but that might have something to do with it. they did not break up the requried return (for liquidity, growth, or premium) so I don’t think forcusing on G only is the answer here.
iyounus Wrote: ------------------------------------------------------- > I just used common sense approach. Warehouse are > cheap to construct hence, less depreciation. > Hotels require a large capital investment to > construct, hence higher depreciation. Other two > properties were in highly desireable locations. me2. no math done for me
blueuser Wrote: ------------------------------------------------------- > I put hotel as well for the most depreciation. > Stalla has a somewhat similar question on the > practice exam book and they claim that you get the > most value for your money with a warehouse since > the depreciation is minimal. And in my opinion it > makes sense…why would a warehouse depreciate > more than a hotel or an apartment building? I did > not focus on the G at all but that might have > something to do with it. they did not break up the > requried return (for liquidity, growth, or > premium) so I don’t think forcusing on G only is > the answer here. I’m going to blow a freaking gasket if 1 MORE PERSON tries to explain why it’s “logical” that a warehouse wouldn’t depreciate as fast as a hotel. Seriously, I’m going to blow! Learn what the Cap Rate is people. This was a gimme question if you just knew what the cap rate is, and that the warehouse having a cap rate > required rate meant it was depreciating.
onthepuck is right, that question took about 5 seconds if understood the Cap Rate, Discount Rate, Growth Rate relationship. Every other approach is based on what is often a characteristic approach of a property type, but you were given the absolute answer.
ontheuptick Wrote: ------------------------------------------------------- > blueuser Wrote: > -------------------------------------------------- > ----- > > I put hotel as well for the most depreciation. > > Stalla has a somewhat similar question on the > > practice exam book and they claim that you get > the > > most value for your money with a warehouse > since > > the depreciation is minimal. And in my opinion > it > > makes sense…why would a warehouse depreciate > > more than a hotel or an apartment building? I > did > > not focus on the G at all but that might have > > something to do with it. they did not break up > the > > requried return (for liquidity, growth, or > > premium) so I don’t think forcusing on G only > is > > the answer here. > > > I’m going to blow a freaking gasket if 1 MORE > PERSON tries to explain why it’s “logical” that a > warehouse wouldn’t depreciate as fast as a hotel. > Seriously, I’m going to blow! > > Learn what the Cap Rate is people. This was a > gimme question if you just knew what the cap rate > is, and that the warehouse having a cap rate > > required rate meant it was depreciating. ontheuptick i was very close to creating another profile and ask this question again just so that I could see you get pissed off again 
but then it’s getting close to the work day. can’t remember the exact details of the problem but if the required rate and the cap rate were given then your way would make sense…but then again we’ll never know.
I think I got that question right because I live in Metro Detroit–we’re used to spotting depreciating assets because they’re everywhere around us.
goblue06 Wrote: ------------------------------------------------------- > I think I got that question right because I live > in Metro Detroit–we’re used to spotting > depreciating assets because they’re everywhere > around us. Just like the depreciating asset that is your favorite football team (judging by your screenname).
i think the last question about gross income multiplier method overstating value was the only qualitative question in this section. rest were plug and chug
ontheuptick Wrote: ------------------------------------------------------- > Just like the depreciating asset that is your > favorite football team (judging by your > screenname). So clever! Hahahahaha! You are a smart one, ontheuptick! You really got me there!