A property valuer is assessing a 15-year-old commercial building. The replacement cost new is $2,000,000, land value is $800,000, and total depreciation is estimated at 25%. What is the property value using the summation approach?
Correct Answer
B) $2,300,000
Using summation approach: Land Value + (Replacement Cost New - Depreciation) = $800,000 + ($2,000,000 - $500,000) = $2,300,000. Depreciation only applies to the building component, not the land.
Why This Is the Correct Answer
Using summation approach: Land Value + (Replacement Cost New - Depreciation) = $800,000 + ($2,000,000 - $500,000) = $2,300,000. Depreciation only applies to the building component, not the land.
About Property Valuation & Appraisal
Valuation methods, comparative market analysis, factors affecting value, and appraisal standards.
Study Tips for Valuation
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More Valuation Questions
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