Property Valuation
In the cost approach, if the subject property is 10 years old and has an effective age of 7 years (due to good maintenance), the depreciation calculation would be based on:
A10 years
B7 years (effective age)✓ Correct
CThe average of 10 and 7 years
DThe total economic life only
Explanation
Depreciation in the cost approach is based on effective age (reflecting actual condition and utility), not chronological age. A well-maintained property may have a lower effective age than its actual age.
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