Property Valuation
A Texas commercial appraiser uses 'discounted cash flow' (DCF) analysis for a 10-year hold period. The discount rate used reflects:
AThe property's current cap rate
BThe investor's required rate of return on equity, accounting for risk and alternative investments✓ Correct
CThe current prime lending rate
DThe property's historical appreciation rate
Explanation
The discount rate in DCF analysis represents the investor's required rate of return—also called the equity yield rate or IRR (internal rate of return) target. It reflects the investor's risk tolerance, alternative investment opportunities, and market conditions. Projecting future cash flows (including reversion/sale) and discounting them at the required rate produces a present value.
Related Texas Property Valuation Questions
- An appraiser using the income approach to value a commercial property calculates net operating income (NOI) by:
- A Texas appraiser is completing an appraisal and uses three comparable sales. After adjustments, the comparables indicate values of $310,000, $315,000, and $308,000. The appraiser reconciles these to $312,000. This process is called:
- Under Texas law, a property owner who disagrees with their county appraisal district's value may protest. After the ARB hearing, if still unsatisfied, the owner can appeal to:
- An appraiser uses three approaches to value a Texas mixed-use property with residential and retail space. The MOST appropriate approach to emphasize is:
- Paired sales analysis is an appraisal technique used to:
- A Texas property is appraised under USPAP. USPAP Competency Rule requires that an appraiser:
- In Texas, homestead exemptions reduce the taxable value of a primary residence. The standard homestead exemption for school district taxes (mandatory state minimum) is:
- When a USPAP-compliant appraisal is required for a federally related transaction in Texas, the appraiser must:
Practice More Texas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Texas Quiz →