FINA 210 Lecture Notes - Lecture 8: Earnings Before Interest And Taxes, Income Approach, Weighted Arithmetic Mean
6 Dec 2016
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Document Summary
Traditional valuation techniques: cost approach technique: use when trying to find value of a unique building. Used to value real estate with little or no depreciation. Used by municipalities or local govt to calculate property taxes. Ex: trying to find value of church or hospital that has been sold or in market. Advantages of cost approach: easy to apply procedures if information is available. Different variables used to calculate value of new building (makes different answers) Step 1: ask contractor how much it would cost to build an identical property. Look at value of land based on municipality. Contractor gives an estimate and can use 3 methods for estimate: Square foot basis: estimate based on total sq ft needed. Put in place: cost to put items (foundation, walls, roof, a/c, plumbing) in place. Quantitative survey: how much raw materials needed to build building. I(cid:374)(cid:272)ludes (cid:272)o(cid:374)t(cid:396)a(cid:272)to(cid:396)"s p(cid:396)ofit: value of the land + new bldg. could be different for the bases.
