Under the summation approach, if land is valued at $400,000 and the replacement cost of improvements is $350,000 with depreciation of $50,000, what is the property's value?
Correct Answer
A) $700,000
The summation approach calculates value as land value plus depreciated replacement cost of improvements: $400,000 + ($350,000 - $50,000) = $700,000. This method is particularly useful for unique properties or when comparable sales are limited.
Why This Is the Correct Answer
Land plus depreciated improvements: $400,000 + ($350,000 - $50,000) = $700,000.
Why the Other Options Are Wrong
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