For a restored historic theater in October 2026, an appraiser estimates reproduction cost new at $620,000, physical deterioration at $70,000, functional obsolescence at $25,000, external obsolescence at $35,000, and site value at $140,000. What indicated value does the cost approach produce?
Correct Answer
D) $630,000
Step 1: Total depreciation is $70,000 + $25,000 + $35,000 = $130,000. Step 2: Depreciated improvement value is $620,000 - $130,000 = $490,000. Step 3: Add site value of $140,000. The indicated value by the cost approach is $630,000.
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Builder Marcus spends $140,000 on luxury finishes in a subdivision where buyers usually pay only modest premiums for high-end upgrades. Which statement is most accurate from a cost-approach perspective?
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Each of the following is generally an example of external obsolescence EXCEPT: