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Financial Acumen for Architects Flashcards

7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Acumen for Architects flashcards as text

  1. When preparing a project budget, 'soft costs' typically include all EXCEPT:

    Answer: Structural steel and concrete

    Structural steel and concrete are hard construction costs; soft costs encompass professional fees, permits, FF&E, financing, and similar non-construction expenses.

  2. An architect negotiates a not-to-exceed (NTE) hourly fee contract. The project is completed under budget. Which statement is TRUE?

    Answer: The architect bills only actual hours up to the NTE cap

    Under an NTE contract, the architect invoices actual hours worked at agreed rates, but may never exceed the stated cap.

  3. Value engineering (VE) is most effectively applied during which project phase to yield the greatest cost savings?

    Answer: Schematic Design and Design Development

    VE opportunities are greatest early in design, when changes cost little; each subsequent phase exponentially increases the cost of implementing changes.

  4. A CM at-risk's Guaranteed Maximum Price (GMP) typically includes all EXCEPT:

    Answer: Design fees for the architect of record

    The GMP covers construction costs; the architect of record's design fees are a separate contract between the owner and architect, outside the GMP.

  5. Depreciation in real estate is primarily relevant to an architect's financial analysis because it:

    Answer: Provides tax benefits that affect owner ROI calculations

    Depreciation allows owners to deduct building value over time, reducing taxable income and improving after-tax return on investment—a key metric in owner feasibility studies.

  6. A project's net present value (NPV) of expected cash flows is negative. This generally indicates:

    Answer: The project will not recover the initial investment at the assumed discount rate

    A negative NPV means the present value of future cash inflows is less than the initial investment at the chosen discount rate, signaling the project may not be financially viable.

  7. An owner's total project cost (TPC) budget is $12M. Construction is estimated at $9M. What percentage represents hard construction costs?

    Answer: 75%

    $9M ÷ $12M = 0.75, or 75%; the remaining 25% covers soft costs such as fees, permits, financing, and FF&E.