Question

Define the following terms:

1. Investment vs. disinvestment

2. Nominal values vs. real values

3. Financial feasibility analysis

4. Capitalization model for land appraisal

5. Land lease contract

Answer 1

a. Investment refers to the conversion of money or cash into securities, debentures, bonds or any other claims on money. Disinvestment can also be defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary.

b. Real value is nominal value adjusted for inflation.The nominal value of time-series data such as gross domestic product and incomes is adjusted by a deflator to derive their real values.

Nominal value = real value * ( 1+ inflation)

c. Financial feasibility analysis is an analysis and evaluation of a proposed project to determine if it (1) is technically feasible (2) is feasible within the estimated cost, and (3) will be profitable. Feasibility studies are almost always conducted where large sums are at stake.

d. Capitalisation approach to appraisal assigns a property value based on the estimated returns of a property. The appraisal determines the market value of a property.

e. A land lease, also called a ground lease, is a lease agreement that permits the tenant to use a piece of land owned by the landlord in exchange for rent. Land leases work very similarly to the way traditional property leases operate, and tenants can enter into both residential and commercial agreements.