Certified Residential Appraiser Practice Exam

Which analysis studies the economic benefits of a project or investment?

1. Marketability Analysis

2. Feasibility Analysis

3. Demand Analysis

4. Disaggregation

The correct answer is: Feasibility Analysis

Feasibility analysis is a comprehensive approach that evaluates the potential economic benefits of a project or investment. This method examines various factors including financial viability, market trends, potential costs, risks, and expected revenues to determine whether a project is worthwhile and sustainable in the long term. By analyzing these components, feasibility analysis helps stakeholders make informed decisions regarding the pursuit of an investment. For instance, it assesses if projected revenues can cover costs, whether the market can support the project, and what obstacles it may encounter. This evaluation is essential for ensuring that investments are sound and have a likelihood of contributing positively to economic growth or profit. Marketability analysis, on the other hand, focuses specifically on the demand for a product or service in a particular market rather than the overall financial feasibility of the project. Demand analysis is closely related, as it looks at consumer interest and demand for a specific product but does not encompass the broader financial or operational considerations. Disaggregation typically refers to breaking data into smaller parts to analyze, which does not directly assess the economic benefits of a project. Overall, feasibility analysis stands out as the methodology specifically aimed at understanding the economic implications of a proposed investment or project.