50 CAREFULLY DESIGNED IBBI-ORIENTED MCQS

50 CAREFULLY DESIGNED IBBI-ORIENTED MCQS FOR PRACTICE

Below are 50 carefully designed IBBI-oriented MCQs covering Land & Building (L&B) and Plant & Machinery (P&M) numericals and concepts.
Each question reflects IBBI examiner traps, followed by the correct answer + crisp explanation.

✅ 50 HIGH-PROBABILITY IBBI MCQs FOR PRACTICE

(With Answers & Explanations)

🏠 LAND & BUILDING (MCQ 1–25)

Net annual income from a property is ₹6,00,000 and capitalization rate is 10%. Market value is:₹50,00,000
B. ₹55,00,000
C. ₹60,00,000
D. ₹65,00,000

✅ Answer: C
🧠 Explanation: Value = 6,00,000 ÷ 0.10 = ₹60,00,000

Which income is used for capitalization?
Gross annual rent
B. Potential income
C. Net annual income
D. Contractual rent

✅ Answer: C
🧠 Net income reflects true earning capacity.

Capitalization rate is best defined as:
Cost of capital
B. Rate of depreciation
C. Return expected from property
D. Inflation rate

✅ Answer: C
🧠 Cap rate reflects investor’s expected return.

Forced sale value is generally:
Higher than market value
B. Equal to market value
C. Lower than market value
D. Same as liquidation value

✅ Answer: C
🧠 Limited exposure reduces realizable price.

If market value is ₹80 lakh and distress discount is 20%, forced sale value is:
₹64 lakh
B. ₹60 lakh
C. ₹70 lakh
D. ₹72 lakh

✅ Answer: A
🧠 80 × 0.8 = 64

FAR of a plot is 2.0 and plot area is 1,500 sq.m. Permissible built-up area is:
2,000 sq.m
B. 2,500 sq.m
C. 3,000 sq.m
D. 3,500 sq.m

✅ Answer: C
🧠 FAR × plot area

Residual method is MOST suitable when:
Rental data is available
B. Comparable sales exist
C. Property is under development
D. Property is fully occupied

✅ Answer: C
🧠 Used for development land valuation.

In residual valuation, developer’s profit is:
Added to land value
B. Ignored
C. Deducted as cost
D. Treated as income

✅ Answer: C
🧠 It is a mandatory deduction.

Which is NOT a premise of value?
Market value
B. Forced sale value
C. Liquidation value
D. Historical cost

✅ Answer: D
🧠 Historical cost is an accounting concept.

Highest and Best Use must be:
Legally permissible only
B. Physically possible only
C. Economically feasible only
D. All of the above

✅ Answer: D
🧠 All four tests apply.

Discount rate differs from cap rate because:
It applies to single income
B. It applies to multiple cash flows
C. It ignores time value
D. It equals inflation

✅ Answer: B
🧠 Discounting = multi-year cash flows.

Vacant land valuation primarily uses:
Income approach
B. Cost approach
C. Sales comparison
D. Profit method

✅ Answer: C
🧠 Comparable sales are key.

Which cost is excluded in cost approach?
Construction cost
B. Architect fee
C. Developer’s profit
D. Interest during construction

✅ Answer: C
🧠 Profit is not a “cost”.

Market value assumes:
Distress sale
B. Compulsion
C. Adequate marketing
D. Liquidation

✅ Answer: C

Built-up area differs from carpet area mainly due to:
Plot size
B. FAR
C. Walls and common areas
D. Zoning

✅ Answer: C

Capital value factor (multiplier) for 8% cap rate is:
8
B. 10
C. 12.5
D. 15

✅ Answer: C
🧠 1 ÷ 0.08

Which valuation approach is least suitable for owner-occupied residential property?
Cost
B. Income
C. Sales comparison
D. Residual

✅ Answer: B

Stamp duty value is:
Always equal to market value
B. Always higher than market value
C. Statutory value
D. Forced sale value

✅ Answer: C

Obsolescence due to outdated layout is:
Physical
B. Functional
C. Economic
D. Environmental

✅ Answer: B

Economic obsolescence arises due to:
Wear & tear
B. Poor design
C. External factors
D. Poor maintenance

✅ Answer: C

In valuation, “fair value” differs from market value because it:
Ignores market participants
B. Reflects specific parties
C. Excludes time value
D. Is always higher

✅ Answer: B

Which depreciation is incurable?
Physical
B. Functional
C. Economic
D. Deferred maintenance

✅ Answer: C

Guideline value is primarily used for:
Valuation accuracy
B. Stamp duty
C. Income tax computation
D. Rent fixation

✅ Answer: B

Comparable sale method adjustment is done for:
Time
B. Location
C. Size
D. All of the above

✅ Answer: D

In CIRP valuation, valuers generally assess:
Market value only
B. Fair value & liquidation value
C. Book value
D. Replacement cost

✅ Answer: B

🏗️ PLANT & MACHINERY (MCQ 26–50)

RCN stands for:
Replacement cost new
B. Repair cost net
C. Realisable cost net
D. Residual cost new

✅ Answer: A

Cost of freight is:
Excluded from RCN
B. Included in RCN
C. Treated as depreciation
D. Treated as salvage

✅ Answer: B

Which cost is excluded from RCN?
Installation
B. Import duty
C. Interest on loan
D. Trial run cost

✅ Answer: C

Straight line depreciation assumes:
Higher depreciation initially
B. Equal depreciation every year
C. Zero salvage value always
D. Market-based depreciation

✅ Answer: B

A machine has useful life of 20 years and effective age of 8 years. Remaining life is:
10 years
B. 12 years
C. 14 years
D. 8 years

✅ Answer: B

Effective age reflects:
Purchase year
B. Manufacturing year
C. Condition of asset
D. Accounting life

✅ Answer: C

Salvage value is realized:
During normal use
B. At end of useful life
C. During liquidation only
D. At forced sale

✅ Answer: B

Scrap value is MOST relevant in:
Going concern
B. Fair value
C. Liquidation
D. Market value

✅ Answer: C

Physical depreciation is caused by:
External market forces
B. Wear and tear
C. Technological change
D. Legal restriction

✅ Answer: B

Functional obsolescence occurs due to:
Poor maintenance
B. Excess operating cost
C. External pollution norms
D. Fire damage

✅ Answer: B

Economic obsolescence is:
Curable
B. Incurable
C. Always physical
D. Always functional

✅ Answer: B

Depreciated Replacement Cost (DRC) equals:
RCN + depreciation
B. RCN − depreciation
C. Market value − scrap
D. Salvage + cost

✅ Answer: B

A machine costing ₹25 lakh suffers 40% depreciation. Value is:
₹10 lakh
B. ₹12.5 lakh
C. ₹15 lakh
D. ₹20 lakh

✅ Answer: C

Idle machinery under going concern is generally valued at:
Scrap value
B. Zero value
C. Depreciated value
D. Book value

✅ Answer: C

Book value differs from market value because it:
Reflects replacement cost
B. Reflects accounting depreciation
C. Reflects liquidation
D. Reflects salvage

✅ Answer: B