When applying the summation approach to value a property, which component represents the depreciated value of improvements?
Correct Answer
B) Current replacement cost less accumulated depreciation
In the summation approach, the value of improvements is calculated as the current replacement cost of the buildings minus accumulated depreciation due to physical deterioration, functional obsolescence, and external obsolescence. This gives the depreciated replacement cost of improvements.
Why This Is the Correct Answer
The depreciated value of improvements is their current replacement cost less the accumulated depreciation from physical wear, functional obsolescence and external obsolescence. Land is added separately to reach the property's value.
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