Respuesta :
In the basic cost approach formula, we start with New cost, then subtract Accumulated Depreciation, and add Land value.
The basic formula for valuing a property using the cost approach is:
Property Value = Land Value + (Cost New – Accumulated Depreciation).
The cost approach is based on the economic belief that informed buyers will not pay any more for a product than they would for the cost of producing a similar product that has the same level of utility.
The cost approach to valuation is easy to use when the property is new and represents the highest and best use of the property.
Property Value = Reproduction or Replacement Cost of Improvements - Depreciation of Improvements + Land Value
This formula requires 3 separate steps.
1. Estimating the reproduction or replacement cost of the improvements.
2. Estimating depreciation
3. Estimating the value of the land
Therefore,
In the basic cost approach formula, we start with New cost, then subtract Accumulated Depreciation, and add Land value.
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