Final answer:
The value based on the cost-depreciation approach is calculated by subtracting depreciation from the total construction cost, and then adding the land cost. The total construction cost is $245,000, the total depreciation is $49,000, and the land cost is $82,500, resulting in a property value of $278,500.
Step-by-step explanation:
The value based on the cost-depreciation approach involves calculating the cost of construction, accounting for depreciation, and then adding the cost of the land. To determine the construction cost for the living area, we multiply 3,000 square feet by $80 per square foot, resulting in $240,000. The garage area construction cost is 200 square feet multiplied by $25 per square foot, which totals $5,000.
The total construction cost is therefore $240,000 (living area) + $5,000 (garage area) = $245,000. The land cost is calculated by multiplying the lot size (150 feet by 110 feet or 16,500 square feet) by the cost per square foot of the lot ($5), resulting in $82,500.
To calculate depreciation, we consider the economic life of the house (50 years) and the effective age (10 years). Since the house has been depreciated for 10 years, we apply a depreciation rate of (10/50 years) which is 20%. The total depreciation amount is 20% of $245,000 (total construction cost), amounting to $49,000.
To find the value based on the cost-depreciation approach, we subtract the depreciation from the total construction cost and then add the land cost:
- Total Construction Cost: $245,000
- Less: Depreciation ($49,000)
- Depreciated Construction Value: $196,000
- Plus: Land Cost: $82,500
- Property Value: $278,500