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Katyanochek1 [597]
3 years ago
10

A property has a replacement cost new of $350,000. It has an effective age of 20 years and a total expected economic life of 65

years. There are curable items totaling $45,000. If they are cured, it will reduce the effective age to 15 years. What is the value of the building on a modified age-life basis
Business
1 answer:
DIA [1.3K]3 years ago
3 0

Answer:

$234,606

Explanation:

actual replacement cost = $350,000

effective age = 20 years

total economic life = 65 years

years left = 65 - 20 = 45 years

curable items = $45,000 ⇒ effective age 15 years

value of the property using modified age-life basis = (replacement cost - curable items) x (effective age / total economic life)

= ($350,000 - $45,000) - (15 years / 65 years) = $305,000 - 23.08% = $234,606

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