An appraiser is valuing a Hawaii property using the cost approach. Land value is $200,000, replacement cost new is $550,000, and accrued depreciation is 25%. What is the indicated value?

Explanation

Depreciated improvement value = $550,000 × (1 - 0.25) = $550,000 × 0.75 = $412,500. Total value = Land ($200,000) + Depreciated improvements ($412,500) = $612,500. The cost approach always values land separately (land doesn't depreciate) and then adds the depreciated value of improvements.