A Wisconsin assessor uses the cost approach to value a newly constructed commercial warehouse. The assessor estimates the building's replacement cost new at $900,000, calculates total depreciation of $180,000, and determines the land value is $120,000. What is the assessor's indicated value using the cost approach?
Correct Answer
C) $840,000
The cost approach formula is: Value = (Replacement Cost New − Accrued Depreciation) + Land Value. Calculation: $900,000 − $180,000 = $720,000 (depreciated building value) + $120,000 (land) = $840,000. Wisconsin assessors are guided by the Wisconsin Property Assessment Manual, which directs use of all three approaches to value where applicable, with the cost approach particularly relevant for new or special-use properties.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Highest and best use is an appraisal concept that identifies the most profitable, legally permitted, physically possible, and financially feasible use of a property. It is the foundation of all property valuation.
Homestead portability allows homeowners to transfer a portion of their accumulated homestead tax savings to a new homestead in the same state.
The income approach estimates a property's value based on the income it generates by converting net operating income into a value estimate using a capitalization rate. It is the preferred method for income-producing properties.
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