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Business Definition for: cost approach
cost approach
method of appraising property based on adding the reproduction cost of improvements, less depreciation, to the market value of the site.
cost approach
a method of appraising property based on the depreciated cost or replacement cost new) of improvements, plus the market value of the site .
Example: Table 14.
| TABLE 14 COST APPROACH |
||
| Reproduction cost (new) | $100,000 | |
| Minus: Physical deterioration | $25,000 | |
| Functional obsolescence | 10,000 | |
| Economic obsolescence | 5,000 | |
| Total accrued depreciation | $40,000 | - 40,000 |
| Depreciated value of improvements | $ 60,000 | |
| Add : Site value | 20,000 | |
| Value indicated by cost approach | $ 80,000 |
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
