An appraiser in Miami is using the cost approach to value a 5-year-old commercial building. The replacement cost new is $2,500,000, the land value is $800,000, and the total depreciation is estimated at $375,000. What is the indicated value using the cost approach?
Correct Answer
C) $2,925,000
Using the cost approach formula: Land Value + (Replacement Cost New - Depreciation) = $800,000 + ($2,500,000 - $375,000) = $800,000 + $2,125,000 = $2,925,000. Option A incorrectly subtracts land value instead of adding it. Option B fails to include the land value in the final calculation. Option D incorrectly adds depreciation instead of subtracting it.
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