Property Valuation
In New Mexico, when an appraiser calculates 'depreciation' in the cost approach using the 'age-life method,' the formula is:
AReplacement Cost / Effective Age
BEffective Age / Total Economic Life x Replacement Cost New✓ Correct
CChronological Age / 50 x Land Value
DAnnual Depreciation x Number of Years
Explanation
The age-life depreciation formula: Depreciation = (Effective Age / Total Economic Life) x Replacement Cost New. If effective age is 10 years and total economic life is 50 years: depreciation = 10/50 = 20% of replacement cost new.
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