Property Valuation
A Mississippi appraiser determines the cost to construct a new building is $180 per square foot. The building has 2,000 square feet. Depreciation is estimated at 20%. The depreciated improvement value is:
A$360,000
B$288,000✓ Correct
C$320,000
D$240,000
Explanation
Reproduction/replacement cost = $180 × 2,000 = $360,000. Depreciation = $360,000 × 20% = $72,000.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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