Property Valuation
An appraiser is using the cost approach to value a 10-year-old building. The replacement cost new is $400,000 and the building has experienced 25% total depreciation. The land is valued at $120,000. What is the indicated value?
A$400,000
B$420,000✓ Correct
C$520,000
D$300,000
Explanation
Depreciated building value = $400,000 × (1 – 0.25) = $400,000 × 0.75 = $300,000. Total indicated value = Land + Depreciated improvements = $120,000 + $300,000 = $420,000.
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