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Cost ApproachMEDIUM13.6% of exam

Cost new of the improvements is $280,000 and they are rated 72% good. The site is valued at $95,000. What value does the cost approach indicate?

Correct Answer

B) $296,600

Why this is correct: percentage good is the share that remains, so it multiplies cost new directly. Calculation: $280,000 x 0.72 = $201,600; $201,600 + $95,000 = $296,600. Why the other choices are wrong: $173,400 applies 28%, the depreciation rather than the percentage good; $201,600 omits the site; $375,000 applies no depreciation at all.

Answer Options
A
$201,600
B
$296,600
C
$375,000
D
$173,400

Why This Is the Correct Answer

Why this is correct: percentage good is the share that remains, so it multiplies cost new directly. Calculation: $280,000 x 0.72 = $201,600; $201,600 + $95,000 = $296,600. Why the other choices are wrong: $173,400 applies 28%, the depreciation rather than the percentage good; $201,600 omits the site; $375,000 applies no depreciation at all.

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