Cost Approach Homework Problem

Using the information provided below, estimate the market value of the subject property via the cost approach.

Site is 2.43 acres, zoned for commercial office Proposed building area is 53,000 square feet The anticipated NOI is $520,000 The building cap rate is 9% The land cap rate is 11% Direct building costs are estimated at $60 per square foot Indirect building costs are estimated at 20% of direct costs Entrepreneurial profit is estimated at 15% of both direct and indirect costs The loan amount is $3,000,000 Functional obsolescence is estimated at $200,000 because of inadequate air conditioning Physical deterioration is zero because the building is new External obsolescence is estimated at $75,000 because of the oversupply of office space