Please show your work when answering the questions on the attached document.

UNIVERSITY OF MEMPHIS FOGELMAN COLLEGE OF BUSINESS AND ECONOMICS DEPARTMENT OF FINANCE, INSURANCE AND REAL ESTATE FIR 4340 / 6340 Problem Set #1 Mark Sunderman In working this problem set pay close attention to the instructions on our class web site. Remember, even though you can gain help in the threads, this is still an individual assignment. This assignment does not need to be typed; however, it is very important that you organize your answers clearly and legibly. Since I give partial credit, it is imperative that you show your work in a logical manner. In any written response, remember that I place more weight on content and organization than I do on quantity. You can deliver this assignment to me by posting it the "Dropbox" for this unit - see top bar for the tab for the Dropbox. Attaching it as a file in an e-mail to me is another possibility.1 After the due date, I will be posting the solutions on the web site, and once graded, I will be posting your grade in the grade book. If you would like me to return the problem set to you after I have graded it, please send me an e-mail with the address you would like it sent. This problem set is worth 75 points (question 1 is worth 15 points - questions 2 and 4 are each worth 25 points - question 3 is worth 10 points). 1. The building being appraised has a current reproduction cost of $350,000, an effective age of 15 years, and a remaining physical life of 35 years. The following information on short-lived building components is also provided. Roof Floor Cover Electrical System Current Reproduction Cost $8,000 $6,500 $9,000 Cost to Cure Curable $1, 975 $1,300 $ 750 Effective Age 11 Years 6 Years 15 Years Total Physical Life 25 Years 10 Years 40 Years Calculate the physical deterioration (curable, incurable--long-lived, and incurable-short-lived). 2. In working on your regression assignment, you came up with the following SAS results (NOTE - this problem can be solved WITHOUT having worked on the 1 When you e-mail me the assignment, please make it clear what software package the assignment is in. I can usually access most types of files, if I know what it is in! If I have problems opening the file, I will contact you (so please keep a copy of the file!). Also please put your name in the name of the file! Page 1 of 4 MRA assignment - the text is enough to solve this question): ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------Answer the following questions relating to this output. NOTE: the variable names are the same as on your assignment handout. a. Which of the above variables are NOT significant at the .10 level. (Hint: The t-statistic is already calculated for you! The column \"Standard Error\" is the Page 2 of 4 standard error of the coefficient.) b. Calculate a .90 confidence interval around OPRCH and CPRCH. What does this interval mean? c. What would the value of a house be if it had the following characteristics? TOTACR = .75 TOTLIV = 2500 TOTFIX = 9 ATGAR = 500 DETGAR = 0 DECK = 750 CARPOT = 0 ASGRHS = 0 OPRCH = 250 CPRCH = 0 PATIO = 450 d. Calculate the .90 confidence interval around the estimate made in c? (Hint: Your Se is \"Root MSE\".) What does this interval mean? e. If the model had been based on 75 sales, how many degrees of freedom would you have? f. In building a model, should you use the \"adjusted R2" or the value for \"R2" in determining the best model? Explain. 3. The building being appraised has a current reproduction cost of $750,000, an effective age of 13 years, and a total economic life of 60 years. The cost to cure all curable items is estimated at $35,000. Calculate the accrued depreciation and improvement value of the structure using the modified economic age-life method. 4. Calculate the replacement cost using the Boeckh Residential Building Cost Guide (available for download in Part 3 of Unit 4) for the following house: 1) 2) 3) 4) 5) 6) 7) 8) 9) Number of stories: one-story Occupancy: single-family Class of construction: D Ground floor area: 2550 square feet Exterior wall material: 25% "board and batten" and 75% "native stone" Perimeter: 471.25 feet Zip code: 82070 Bathrooms: 2.5 Substructure: basement Page 3 of 4 10) 11) 12) 13) 14) Driveway: asphalt paving (70' by 20') Water and sewer: private well and septic system Additional features a) one masonry fireplace (one hearth and chimney) b) 2-car attached frame garage c) central air conditioning (will use existing ducts) d) deck off the back of the house (35' by 20') e) full finished basement Build-ins: a) dishwasher b) garbage disposal c) range hood d) hot tub e) electronic air filter f) central vacuum system Effective age and condition: 15 years, very good condition Page 4 of 4