(i)

PRACTICAL VALUATION - Vol. 18B

REGISTERED VALUER EXAMINATION (IBBI)

ONE MARK CASE STUDIES

(Note : i) Multiple choice questions for Q 34 to 94 are discussed

in the main book Practical valuation - Vol. 18
ii) Case studies for 12 marks Q89 to 94 are discussed in
Practical valuation - Vol. 18A)

B. KANAGA SABAPATHY
Tiruchirappalli - 620 001.

Note : Those who are interested for the soft copy of the books Practical
valuation Vol. 18A & 18B (at free of cost), may communicate their willingness to
bkvaluer@[Link]
(ii)
 (iii)

REGISTERED VALUER EXAMINATION (IBBI)

ONE MARK CASE STUDIES

PRACTICAL VALUATION - Vol. 18B

B. KANAGA SABAPATHY
Tiruchirappalli - 620 001.
 (iv)

DISCLAIMER

While every effort is taken to avoid errors or omissions in this publication, any
mistake or omission that might have crept in is not intentional. It may be taken note
of that neither the publisher nor the author will be responsible for any damage or
loss of any kind arising to any one in any manner of account of such errors and
omissions.
 (v)

B. Kanaga sabapathy No. 1, Prestige Flats

bkvaluer@[Link] 6, Reynolds Road,
[Link] Cantonment,
Whatsapp : 97918 - 74829 Tiruchirappalli - 620 001. (TN)

PRACTICAL VALUATION - Volume 18 B

AUTHOR’S NOTE

18.09.2018

For the purpose of giving preliminary guidance to those who intend to appear for the
registered valuer examination conducted by Insolvency and Bankruptcy Board of India, I
have come forward to consolidate a few one mark case studies and present them in the
form of a small booklet.

Many case studies are my own, a few case studies are taken from the other books whereas
a few have been shared by the practising valuers. I wish to express my sincere thanks to
Mr. N. Ravindran, Mr. R. Jayaraman, Mr. K. Selvaraj and others.

Maximum efforts have been taken to provide the workout details and answers correctly. It
is upto the participants to take a judicial decision while facing questions during the
examination.

My requests to the readers are :

1) Please give feedback if there are any mistakes.

2) Give suggestions for making any further improvements.
3) Please share the case study you attended in your examination.

The main book of Practical valuation - Volume 18 contains the multiple choice questions
for Q34 to 94. The book of Practical valuation - Volume 18A contains case studies for Q89
to 94. Those who are interested in obtaining the soft copy of this Volume 18A & 18B, may
communicate their willingness to bkvaluer@[Link] and the same will be forwarded to
them at free of cost.

LET KNOWLEDGE SPREAD

(B. Kanaga sabapathy)

 (vi)

Note :

1. The illustrations given in this book are given mainly for the purpose
of preparing for IBBI examination.

2. For the available data, only the outlines have been discussed here.
Depending upon the situation and the probable options given, the
participant must be able to take judicious decision.

3. Kindly correct me if I am wrong.

- B. Kanaga sabapathy
 1

ONE MARK CASE STUDY ON VALUATION

FOR IBBI EXAMINATION

- Compiled by B. Kanaga sabapathy

Tiruchirappalli

Exercise 1 :

A machine was purchased for Rs. 1,00,000/- @ 15% depreciation of SLM. What is the
written down value after 2 years?

a) Rs. 70,000/- b) Rs. 80,000/-

c) Rs. 60,000/- d) Rs. 90,000/-

Depreciation for 1 year by = 1,00,000 x 0.15

Straight line method
Depreciation amount = Rs. 15,000/year

Depreciated value after 1 year = 1,00,000 - 15,000

= Rs. 85,000/-

Depreciated value after the = 85,000 - 15,000

second year
= Rs. 70,000/-

Written down value after 2 years = Rs. 70,000/-

Ans ‘a’

Exercise 2 :

A property has a net income of Rs. 30,000/-. One appraiser decides to use a 12 percent
capitalisation rate, while a second appraiser uses a 10 percent rate. What is the
difference in appraisal value of the two valuers?

a) Rs. 50,000/- b) Rs. 60,000/-

c) Rs. 40,000/- d) Rs. 70,000/-
 2

First appraiser :

100
Capitalised value = 30,000 x = Rs. 2,50,000/-
12

Second appraiser :

100
Capitalised value = 30,000 x = Rs. 3,00,000/-
10

By using a higher rate of return, the value is decreased by Rs. 50,000/-.

Ans ‘a’

Exercise 3 :

The net income was reported at Rs. 21,000/- and the property was sold for Rs. 3,00,000.
What capitalisation rate is applied to this sale?

a) 5% b) 8%
c) 6% d) 7%

Capitalised value = Rs. 3,00,000/-

Net income = Rs. 21,000/-
Net income
Capitalised value = x 100
X
21,000
3,00,000 = x 100
X
21,000 x 100
X =
3,00,000
= 7%

Ans ‘d’

Exercise 4 :

A mobile phone was purchased for Rs.50,000/-. Its salvage value is Rs. 10,000. Total life
time use 60,000 hours. Used time 20,000 hours. What is the depreciation of the cell
phone?
 3

a) Rs. 20,000/- b) Rs. 3,333/-

c) Rs. 13,333/- d) Rs. 23,333/-

Phone purchased for = Rs. 50,000/-

Salvage value = Rs. 10,000/-
Net value = Rs. 40,000/-
Used time = 20,000 hours
Total life = 60,000 hours
20,000 1
Depreciation = =
60,000 3
40,000
Depreciation value =
3
= Rs. 13,333/-.

Ans ‘c’

Exercise 5 :

A Contractor took a loan of Rs. 36,00,000/- from a bank for construction of modern building
2 years back. He has to repay the loan at the Interest of 10%. If the sale of the property is
yet to take one year, calculate the amount to be paid by the contractor?

a) Rs. 46,00,000 b) Rs. 48,91,600

c) Rs. 49,00,000 d) Rs. 47,91,600

Amount borrowed = Rs. 36,00,000

Amount to which Re. 1/- will = (1 + i)n
accumulate @ 10% in 3 years
= (1 + 0.1)3
= 1.331

Amount to be repaid by the = (1.331 x 36,00,000)

contractor
= Rs. 47,91,600/-

Ans ‘d’

Exercise 6 :

A promoter purchased a residential property for Rs. 60,00,000/- and immediately carried
out certain interior decorations works for Rs. 20,00,000/-.
 4

He intends to dispose of the property at the end of 4 years. Calculate the cost for Purchaser
if he expects a return of 12% on his investment.

a) Rs. 1,25,92,000 b) Rs. 1,35,92,000

c) Rs. 1,20,00,000 d) Rs. 1,55,63,000

Initial investment = 60,00,000 + 20,00,000

= 80,00,000

Amount to which Re. 1/- will = (1 + 0.12)n

accumulate @ 12% in 4 years
= (1 + 0.12)4
= 1.574

Cost for the purchaser = 1.574 x 80,00,000

= Rs. 1,25,92,000/-

Ans ‘a’

Exercise 7 :

An Investor has the right to receive Rs. 25,00,000/- from a property after a period of
9 years. Assuming the rate of interest of 8% Find out the amount for which the investor will
be ready to relieve his future right over the property.

a) Rs. 13,50,000 b) Rs. 12,50,000

c) Rs. 14,00,000 d) Rs. 15,00,000

Amount receivable in 9 years time= Rs. 25,00,000/-

1
P.V. of Re. 1/- in 9 years @ 8% =
(1 + i)n
1
=
(1 + 0.08)9
= 0.5
P.V. (Present value) = 25,00,000 x 0.5
= Rs. 12,50,000/-

Ans ‘b’
 5

Exercise 8 :

A property owner is able to save Rs 50,000/-per year from the net income of his property
and he invest this amount each year to earn interest at 7%. Find out the amount which will
be available at the end of 18 years.

a) Rs. 18,00,000 b) Rs. 16,00,000

c) Rs. 17,00,000 d) Rs. 20,00,000

Annual saving = Rs. 50,000/-

Amount Re. 1/- P.A. at 7% for 18 years
Formula (1 + i)n - 1 (1 + 0.07 )18 - 1
APA = =
i 0.07
2.3799
=
0.07
= 34

Total amount available after 18 years :

= 34 x 50,000
= Rs. 17,00,000/-

Ans ‘c’

Exercise 9 :

A Promoter at Chennai constructed 4 flats of 1700, 1400, 1300, 1600 [Link]. in a plot area
of 4000 [Link].

(i) What is the FSI?

a) 1.2 b) 1.3 c) 1.6 d) 1.5

(ii) What is UDS of land for the flat of 1600 [Link].?

a) 1066.7 [Link]. b) 1055 [Link].

c) 1000 [Link]. d) 1006 [Link].

Area of the site = 4,000 [Link].

Built up area = 6,000 [Link].
(1,700 + 1,400 + 1,300 + 1.600)
 6

Total built up area

FSI =
Area of the site
6,000
= = 1.5
4,000
Flat area 1,600
UDS = =
FSI 1.5
= 1066.7 [Link].
i) Ans ‘d’
ii) Ans ‘a’

Exercise 10 :

A Real estate promoter has approached the landlord for joint venture development of an
apartment for which the unit rate of construction is Rs. 3000. The land rate is
Rs. 6000/[Link]. FSI = 2, What will be the joint venture ratio of promoter & Landlord?

a) 35 : 65 b) 40 : 60 c) 50 : 50 d) 37 : 67

FSI = 2
Land rate = Rs. 6,000/[Link].
Land component (6,000/2) = Rs. 3,000
Building rate = Rs. 3,000
Land + Building = Rs. 6,000/[Link].
3,000
Landlord’s share = x 100
6,000
= 50%

Ans ‘c’

Exercise 11 :

Mr. ‘X’ acquired a property at Coimbatore on 06.09.1972 for 2.25 lakhs. Fair market value
of the property as on 1.4.81 is 9.50 lakhs. The property was sold on 25.11.2014 for a sale
consideration of 105 lakhs. What is the Taxable capital gain? C.I.I. for 1981 & 2014 are
100 & 1,024 respectively.

a) Rs. 6,62,000/- b) Rs. 5,00,000/-

c) Rs. 7,72,000/- d) Rs. 8,00,000/-

1,024
Indexed cost of acquisition= 9,50,000 x
100
 7

= Rs. 97,28,000/-

Taxable capital gain = 1,05,00,000 - 97,28,000

= Rs. 7,72,000/-

Ans ‘c’

Exercise 12 :

A Businessman acquires a property at Tiruchirappalli on 24.12.2010 for Rs. 95 lakhs. The

same was sold for Rs. 130 lakhs in 2014. What is the capital gain? C.I.I. for 2010 & 2014
are 711 & 1,024 respectively.

a) 5.82 L b) 7.82 L
c) 8.50 L d) Capital Loss

1,024
Indexed cost of acquisition = 9,50,000 x
711
= Rs. 1,36,82,000/-
Taxable capital gain = 1,30,00,000 - 1,36,82,000
= Negative
= Capital loss

Ans ‘d’

Exercise 13 :

Built-up area of an apartment building at Chennai 9000 [Link]. is proposed to be constructed

in a site of 4500 [Link]. Prevailing market rate of land is Rs 6000/[Link]. Unit rate of construction
is Rs 2800/[Link]. Promoter’s profit = 20% What is the composite rate of the flat?

a) 7960 [Link]. b) 6500 [Link].

c) 6960 [Link]. d) 7600 [Link].

Built up area = 9,000 [Link].

FSI = 9,000 / 4,500 = 2
Prevailing market rate of land = Rs. 6,000/[Link].
Land rate 6,000
Land component = =
FSI 2
= 3,000/[Link].
 8

Building rate = Rs. 2,800/[Link].

Land + Building = 3,000 + 2,800
= Rs. 5,800
Add 20% profit = Rs. 1,160
Composite rate = Rs. 6,960/[Link].

Ans ‘c’

Exercise 14 :

A 600 [Link]. of shop building at T. Nagar Chennai is occupied by a tenant. The net monthly
rent is Rs. 45,000/-. Find out the value of the property by [Link] by adopting a rate of
return 6%

a) 85,00,000/- b) 95,00,000/-
c) 90,00,000/- d) 80,00,000/-

Monthly rent = Rs. 45,000/-

Yearly rent = 12 x 45,000
= Rs. 5,40,000/-
Rate of return = 6%
100
Value of the property = 5,40,000 x
6
= Rs. 90,00,000/-

Ans ‘c’

Exercise 15 :

Total extent of a site is 0.162 Hectare. Total built-up area of the building is 26,136 [Link].
What is the FSI?

a) 1.2 b) 1.5 c) 2.0 d) 1.0

Total built up area

FSI =
Area of the site
26,136 x 0.0929 26,136
= or
0.162 x 10,000 0.162 x 2.47 x 43,560
= 1.5

Ans ‘b’
 9

Exercise 16 :

An apartment building at Tiruchirappalli consists of 4-floor, eight flat of 1125 [Link]. at each
floor. Area of the site = 2230 Sq.m. What is the UDS of land for each flat?

a) 1500 [Link]. b) 1200 [Link].

c) 600 [Link]. d) 750 [Link].

4 x 8 x 1,125
FSI =
2,230 x 10.76
= 1.50

1,125
UDS =
1.5
= 750 [Link].

Ans ‘d’

Exercise 17 :

A Contractor took a loan Rs 40,00,000/-from the bank, at the rate of Interest 9%. What is
the amount to be paid by the contractor at the end of 4th year?

a) 40.8 L b) 56.48 L c) 60.8 L d) 56.8 L

Amount to which Re. 1/- will accumulate at 9% in 4 years

= (1 + r)n
= (1 + 0.9)4
= 1.412

Amount to be repaid by contractor = (1.412 x 40,00,000)

= Rs. 56,48,000/-

Ans ‘b’

Exercise 18 :

An immovable property yields a net annual income of Rs 60,000. The income is expected
to continue for next 99 years. What is the present value of the property if the rate of
interest is 6% p.a?
 10

a) Rs 8,00,000 b) Rs 10,00,000
c) Rs 12,00,000 d) Rs 15,00,000

Year’s purchase (Y.P.) = 100 / R

= 100 / 6
= 16.67
Present value = Net annual income x Y.P.
= 60,000 x 16.67
= Rs. 10,00,200/-
say Rs. 10,00,000/-

Ans ‘b’

Exercise 19 :

An Investor has invested an amount of Rs 10,00,000 in purchasing an urban site on taking

a loan of 9% compound rate of interest from a bank. What amount he will have to repay to
the bank after 3 years?

a) 11,95,000 b) 13,95,000
c) 12,50,000 d) 12,95,000

i = 0.09
n = 3
So, the amount to which his loan is accumulated
= 10,00,000 x (1 + i)n
= 10,00,000 x (1 + 0.09)3
= 10,00,000 x 1.295
= Rs. 12,95,000/-

Ans ‘d’

Exercise 20 :

5 Years back [Link] had constructed a house at an intrinsic cost of Rs 80,00,000/- and
he has incurred an expenditure 2 years back of Rs 15,00,000/- for construction of a boundary
wall around that house. What is the total accumulated cost of his investment today at a
compound interest of 15% per annum?

a) 160.75 L b) 180.75 L
c) 190.75 L d) 165.90 L
 11

i = 0.15
n = 5
Accumulated cost of his house = 80,00,000 x (1.15)5
= Rs. 1,60,91,000 (A)

Accumulated cost of his = 15,00,000 x (1.15)2

boundary wall
= Rs. 19,84,000 (B)

Total cost of his investment A + B = Rs. 1,80,75,000/-

Ans ‘b’

Exercise 21 :

A framed structure building at Coimbatore. Age is 16 years. Assume the life is 70 years.
What is the depreciation by constant percentage method, if the depreciation is 1.5%

a) 29.5% b) 31.5%
c) 24.5% d) 21.5%

r = 1.5%
n = 16
r
Depreciation = 1 - (1 - )n
100
1.5
= 1 - (1 - )16
100
= 1 - (0.785)
= 0.215 or
= 21.5%

Ans ‘d’

Exercise 22 :

A promoter at Chennai expects 15% profit. Building unit rate = Rs 2,500/[Link]. FSI is 2.
Land rate is Rs 6,000/[Link]. What will be the composite rate?

a) Rs. 6,325 b) Rs 5,325

c) Rs 7,325 d) Rs 5,900
 12

FSI = 2
Prevailing land rate = Rs. 6,000/[Link].
Land component = 6,000 / 2 = Rs. 3,000/-
Building rate = Rs. 2,500/[Link].
Land + Building = Rs. 5,500/[Link].
Add, profit 15% = Rs. 825/[Link].
Composite unit rate = Rs. 6,325/[Link].

Ans ‘a’

Exercise 23 :

It is a load bearing residential building at Chennai. Ground floor : 20 years old, First Floor
: 10 years old, Plinth area of Ground floor : 1,000 [Link]. First floor = 800 [Link]. Assume
salvage value is 10% Life of the building is 60 years. What is the depreciated value of the
first floor building? Replacement cost of ground floor : 2,000/[Link]. & first floor : 1,700/
[Link].

a) 8.52 L b) 9.52 L
c) 4.08 L d) 13.60 L

20
Ground floor depreciation = x (100 - 10)
60
= 30%
Replacement value of first floor = 800 x 1,700
building
= Rs. 13,60,000/-
Depreciation value of FF = 13,60,000 x 0.30
= Rs. 4,08,000/-
Depreciated value of the first floor= 13,60,000 - 4,08,000
building
= Rs. 9,52,000/-

Ans ‘b‘

Exercise 24 :

A newly constructed apartment building at Chennai having block “A” & block “B”, consists
of 30 flats in each block of 1200Sq .ft. equal super Built-up area of each flat. Area of the
land : 4800 [Link]. Assume 10% land of OSR (Open space reserve). What is the UDS of
the each flat?
 13

a) 820 [Link]. b) 620 [Link].

c) 720 [Link]. d) 1100 [Link].

Super built up area of block A & B= 2 x 30 x 1,200

= 72,000 [Link].
Extent of land = 48,000 [Link].
FSI = 72,000 / 48,000 = 1.5
OSR % = 10%
Area of the land to be left for OSR= 4,800 [Link].
Net extent of land = 48,000 - 4,800
= 43,200 [Link].
FSI now = 72,000 / 43,200 = 1.6667
UDS = 1,200 / 1.667 = 719.85,
say 720 [Link].

Ans ‘c’

Exercise 25 :

A businessman is having a commercial building at Coimbatore. It consists of 5 shops of

equal plinth area 1200 [Link]./each shop. He proposed to sell the 2 shops. What will be the
UDS of land for which he has to mention in the sale deed?

a) 1200 [Link]. b) 1280 [Link].

c) 1480 [Link]. d) 1300 [Link].

Total built up area = 5 x 1,200

= 6,000 [Link].
Plot area = 3,000 [Link].
FSI = 6,000 / 3,000 = 2
Plinth area of 2 shops = 2 x 1,200
= 2,400 [Link].
UDS = 2,400 / 2
= 1,200 [Link].

Ans ‘a’

Exercise 26 :

An apartment building at Chennai, consists of 4 floors, each floor built-up area is 2400
[Link]. Area of the plot is 4800 [Link]. What is the plot coverage ?
 14

a) 60% b) 70%
c) 50% d) 40%

Built up area of GF
Plot coverage = x 100
Area of the site
2,400
= x 100
4,800
= 50%

Ans ‘c’

Exercise 27 :

The net monthly rent of a Ground floor residential building of 1300 [Link]. is Rs. 18,000,
and Rs 15,000 for First floor building of same area. Find the approximate value of the
property by rent capitalization method by adopting a rate of return as 4%?

a) 89 L b) 79 L
c) 69 L d) 99 L

Monthly rent = Rs. 18,000 + 15,000

= Rs. 33,000/-
Yearly rent = 12 x 33,000
= Rs. 3,96,000
Rate of return = 4%
Value = 3,96,000 x (100 / 4)
= Rs. 99,00,000/-

Ans ‘d’

Exercise 28 :

An apartment building consists of 8 flats of super built-up area : 1,200 [Link]. The gross
monthly rent of each flat is Rs. 9,000. Outgoing are 15% of the gross rent. The prevailing
rate of return is 3.5%. Find the approximate value of a flat by rent capitalization method?

a) 219.8 L b) 229.8 L
c) 209.8 L d) 240 L

Gross monthly rent = 8 x 9,000

= Rs. 72,000
 15

Outgoings 15% (-) = Rs. 10,800

Net monthly rent = Rs. 61,200
Yearly rent = 12 x 61,200
= Rs. 7,34,400
Rate of return = 3.5%
Value = 7,34,400 x (100 / 3.5)
= Rs. 2,09,82,857/-

Ans ‘c’

Exercise 29 :

A 9,000 [Link]. of factory building at Tiruchirappalli is situated in the 2 Acres of land. Age of
the building is 15 years. Salvage value 25%. Replacement rate of building is Rs. 900/[Link].
Find the salvage value & depreciated value of the building? Life - 30 years.

(i) a) 18.25 L b) 20.25 L

c) 25 L d) 23.25 L

(ii) a) 40.63 L b) 20.25 L

c) 50.63 L d) 60.63 L

Plinth area = 9,000 [Link].

Replacement rate = Rs. 900/[Link].
Replacement value = Rs. 81,00,000
Age = 15 years
Life = 30 years
Salvage value = 25%
Depreciation = (15/30) x 75 = 37.5%
Salvage value = 0.25 x 81,00,000
= Rs. 20,25,000/-
Depreciated value of the building = 0.625 x 81,00,000
= Rs. 50,63,000/-

i) Ans ‘b’ ii) Ans ‘c’

Exercise 30 :

A Commercial property at Chennai was valued by a valuer for Rs 95L during the year
2009. What will be the value of the property as on 2017 by using the formula? Assume
12% escalation per year.
 16

a) 235 L b) 245 L
c) 225 L d) 200 L

r
Amount = P(1+ )n
100
12
= 95,00,000 ( 1 + )8
100

= 95,00,000 (2.4759)
= Rs. 2,35,00,000/-

Ans ‘a’

Exercise 31 :

Mr. “Y” constructed a load bearing building of 232 [Link] during the year 1999. Area of the
plot is 5000 [Link]. What is the depreciation value & value of the property in the year 2018
for bank loan purpose? Assume life : 60 years, Salvage value : 10%. Land rate -
Rs. 2,300/-. Replacement rate of building is Rs. 2,000/[Link].

(i) Depreciation value

a) 14.23 L b) 24.23 L
c) 18.23 L d) 10.23 L

(ii) Value of the property

a) 14.71 L b) 150.71 L
c) 165 L d) 160.71 L

Extent of land = 5,000 [Link].

Land rate = Rs. 2,300/[Link].
Land value = 5,000 x 2,300
= Rs. 1,15,00,000/-
Builtup area = 232 sq.m. = 2,497 [Link].
Unit rate of construction = Rs. 2,000/[Link].
Replacement value = 2,497 x 2,000
= Rs. 49,94,000/-
Age 2018 - 1999 = 19 years
Life = 60 years
Depreciation percentage = (19/60) x 90
= 28.5%
 17

Depreciation value = 0.285 x 49,94,000

= Rs. 14,23,000

Present value of the building = 49,94,000 - 14,23,000

= Rs. 35,71,000/-
Total value of the property = 1,15,00,000 + 35,71,000
= Rs. 1,50,71,000/-

i) Ans ‘a’
ii) Ans ‘b’

Exercise 32 :

An investor purchased a plot of land for Rs 6L, and spent Rs 75,000/- towards stamp duty
and brokerage charges. He started construction of house on plot after 3 years. Calculate
the amount that is blocked up in land investment after 3 years on the basis of purchase
price of land and other expenses by considering 7% compound rate of interest?

a) 9.27 L b) 7.27 L
c) 8.27 L d) 9.10 L

Principal sum = 6,00,000 + 75,000

= Rs. 6,75,000/-
Value of land (A) after 3 years = 6,75,000
7 3
= (1 + )
100
= 6,75,000 x 1.225
= Rs. 8,27,000/-

Ans ‘c’

Exercise 33 :

A residential building at Chennai yields a net rental income (Annuity) of 2.4L/year. What is
the capitalised value of the property at 7% rate of interest?

a) 39.29 L b) 34.29 L
c) 43.29 L d) 31.29 L

Y.P. = 100 / R
 18

= 100 / 7 = 14.286
Present value of the building = 2,40,000 x 14.286
= Rs. 34,28,640/-
say Rs. 34,29,000/-

Ans ‘b’

Exercise 34 :

Ground floor is a load bearing structure of age 30 years. Life - 60 years. First floor is a
framed structure with independent foundation. Age is 10 years. Life is 80 years. What is
the depreciation for FF, assuming a salvage value of 10%.

a) 11.25% b) 45%
c) 33.75% d) 30%

Ground floor :

30
Depreciation = x 90 = 45%
60

First floor :

10
Depreciation = x 90 = 11.25%
80

Ans ‘a’

Exercise 35 :

Lessee receive an income of Rs. 30,000 per annum. He pays Rs. 16,000/- rent to
landlord. If the lessee receives a rent of 8% return, how much the landlord will expect his
return.

a) 0.09 b) 0.07
c) 0.01 d) 0.10

The return of lessee is (atleast) 1% more than the rate of return of lessor.

Hence the rate of return for lessor is 7%.

Ans ‘b’
 19

Exercise 36 :

The lessor receives a ground rent of Rs. 50,000/- from the lessee. The lessee is going to
construct a building and let it out. If the lessor receives a rate of return of 6% from his
lessee, what will be the rate of return that can be expected by the lessee.

a) 6% b) 4%
c) 5% d) 7%

The lessee expects a rate of return of atleast 1% more than the rate of return of
lessor. Hence the rate of return is 7%.

Ans ‘d’

Exercise 37 :

Plot area is 4,800 [Link]., building 2,400 [Link]., age is 20 years, life is 60 years, salvage
value is 15%, land rate is Rs. 1,200/[Link]., replacement rate of building is Rs. 2,100/[Link].
Valuation is for security to bank. What is the forced sale value assuming the reduction
factor is 15%.

a) Rs. 78,94,800/- b) Rs. 92,88,000/-

c) Rs. 1,08,00,000/- d) Rs. 91,80,000/-

Land value = 4,800 x 1,200

= Rs. 57,60,000/-
Building depreciation = (20/60) x 90
= 30%
Depreciated value of building = 0.7 x 2,400 x 2,100
= Rs. 35,28,000/-
Value of land & building = Rs. 92,88,000/-
57,60,000 + 35,28,000
Forced sale value = 0.85 x 92,88,000
= Rs. 78,94,800/-

Ans ‘a’

Exercise 38 :

Total age of this building is 4 years. After four years, the depreciated value is equal to 24%
of the cost. Find out the percentage of depreciation (near to answer) by WDV method.
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a) 24 b) 25
c) 30 d) 35

Method 1 :

r
Formula A = P (1 - )n
100

Depreciated value = Replacement cost x Depreciation

= Replacement cost x 24%

r 24
a) For 24% (1 - )4 = (1 - )4
100 100

76 76 76 76
= x x x
100 100 100 100
= 0.3336 = 33%

25
b) For 25% = (1 - )4
100

75 75 75 75
= x x x
100 100 100 100
= 0.3164 = 32%

30
c) For 30% = (1 - )4
100

70 70 70 70
= x x x
100 100 100 100
= 0.2401 = 24%

35
d) For 35% = (1 - )4
100

65 65 65 65
= x x x
100 100 100 100
= 0.1785 = 18%

The answer is 30% - ‘c’

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Method 2 :

24% 25% 30% 35%

Value 100 100 100 100

Less depreciation - 24 - 25 - 30 - 35

After 1 year 76 75 70 65
Less depreciation - 18.24 - 18.75 - 21 - 22.75

After 2 years 57.76 56.25 49.0 42.25

Less depreciation - 13.86 - 14.06 -14.7 -14.79

After 3 years 43.90 42.19 34.3 27.46

Less depreciation - 10.54 - 10.55 - 10.3 - 9.61

After 4 years 33.36 31.64 24 17.85

The answer is 30% - ‘c’.

Exercise 39 :

Total age of this building is 3 years. After 3 years, the depreciated value is equal to 34.30%
of the cost. Find out the percentage of depreciation by WDV method.

a) 15 b) 20 c) 25 d) 30

15% 20% 25% 30%

Value 100 100 100 100

Less depreciation - 15 - 20 - 25 - 30

After 1 year 85 80 75 70
Less depreciation - 12.75 - 16 - 18.75 - 21

After 2 years 72.25 64 56.25 49

Less depreciation - 10.84 - 12.80 - 14.06 -14.70

After 3 years 61.41 51.20 42.19 34.30

The answer is 30% - ‘d’.

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Exercise 40 :

A building is 40 years old. It has a total life span of 80 years. Current replacement cost of
the building is INR 40,00,000. The salvage value of the materials of the building at the end
of the life is 10% of CRC. What is the depreciation in percentage today?

a) 55% b) 45%
c) 35% d) 65%

Age = 40
Life = 80
Salvage value = 10%
40
Depreciation = x 90 = 45%
80

Answer is ‘b’

Exercise 41 :

A machine was purchased of Rs. 18,000/- before 2 years. It is sold for Rs. 16,000/-
considering 10% depreciation (of Rs. 18,000/-) per annum. The machinery was sold for

a) 2,000 less b) 1,600 less

c) 1,600 profit d) No loss and no gain

Purchased cost two years back = 18,000

Less 10% depreciation = 1,800
Value after one year = 16,200
Less 10% depreciation = 1,800
Value after two years = 14,400
Sold for = Rs. 16,000

... Profit - 16,000 - 14,400 = Rs. 1,600

Answer is ‘c’

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