Real Estate Math
Using straight-line depreciation, a warehouse building with an estimated economic life of 40 years is worth $800,000 new. If it is currently 10 years old, what is the depreciated value of the building (not including land)?
A$560,000
B$600,000✓ Correct
C$640,000
D$720,000
Explanation
Annual depreciation = $800,000 / 40 years = $20,000/year. Total depreciation = $20,000 x 10 years = $200,000. Depreciated building value = $800,000 - $200,000 = $600,000. This calculation is used in the cost approach to appraise income-producing and special-use properties.
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