Property Valuation
Entrepreneurial profit is included in the cost approach because:
AIt represents the contractor's labor cost
BIt compensates the developer for the risk and effort of creating the project✓ Correct
CIt is required by state law for new construction
DIt adjusts for market fluctuations
Explanation
Entrepreneurial profit (or incentive) is included in the cost approach to reflect the compensation a developer requires to undertake the risk and management of a development project.
Related Delaware Property Valuation Questions
- What is 'market conditions adjustment' in a real estate appraisal?
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- Capitalization rate (cap rate) is calculated as:
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- Effective gross income (EGI) in real estate valuation is calculated as:
- In the income approach, before applying the cap rate, the appraiser must estimate:
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