Cost Approach (30 Percent) Use the information below to apply the Cost Approach. Use the following information to develop an estimate of value for the subject property using the cost approach to complete a), b), and c). Assume that the bare land value of the property is $2,500,000.

a) Calculate the reproduction cost of each improvement.

b) Adjust the reproduction cost of each improvement for depreciation. Indicate whether the depreciation is curable physical depreciation, incurable physical depreciation, curable functional obsolescence, or incurable functional obsolescence.

c) Estimate the final total value of the subject property using the cost approach to valuation.

Improvement #1 – Equipment Barn. The equipment barn is a 100 x 200-foot straight steel building, with a cost of $25 per square foot. That cost includes the walls, roof, doors, windows, and a concrete floor. The structure was fully wired for electricity at a cost of $20,000 and plumbing was added at a cost of $12,000. The shop currently needs a new roof, costing $15,000, and the shop exterior needs a coat of paint, costing $5,000. The estimated physical life of the shed is 50 years. The barn has an effective age of 10 years. To be useful under the current conditions, the machinery shed needs to have a higher entryway to the building. This can be corrected for $15,000. If the entryway had been built higher at the time of the original construction, there would have been no addition cost.

Improvement #2 - Work Shop The property also has a 30 x 40-foot workshop that had a base construction cost of $35 a square foot. When the workshop was constructed, the owner also added plumbing to the building (bathroom, water heater, additional faucet inside and out) for $10,000. He also added permanent space heaters, costing $4,000, and window air conditioners for $1,500. To be useful under current conditions, structural alteration to support an equipment hoist is needed, costing $8,000. If the hoist had been installed with the original construction, it would have added $4,800 to the cost of the building. The estimated physical life of the workshop is 40 years. Actual age is 20 years. Effective age is 10 years.

Show all calculations for each part of the problem.

a) Reproduction Cost Improvement #1 Base Cost $ + Electricity $ + Plumbing $__________ Total $ Improvement #2 Base Cost $ + Plumbing $ + Heat $ + Air $__________ Total $

b) Adjust for Depreciation Improvement #1 Reproduction Cost $ Curable Physical Depreciation (Roof) $ (Paint) $__________ Total $ Incurable Physical Depreciation $__________ $ Curable Functional Obsolescence $__________ $ Improvement #2 Reproduction Cost $ Incurable Physical Depreciation $__________ $ Curable Functional Obsolescence ($8,000 - $4,800) $__________ $

c) Cost Approach value of subject property $__________

Answer rating: 100% (QA)

a Reproduction Cost Improvement 1 Base Cost 25 x 20000 sq ft 500000 Electric... View the full answer