FINA 210 Lecture Notes - Lecture 8: Earnings Before Interest And Taxes, Income Approach, Cash Flow
Document Summary
Net income approach: when the property in question generates income, rental income. You can also use cost approach together, the cost approach is always there for property tax purpose. Sales comparable approach: useful when you have many examples available in the market, example: residential properties. Example of cost approach: value of a church/hospital, sales comparable approach cannot be used, does not generate income so we cannot use sales income/net income approach. Pgi vcl = egi operating cost without depreciation = Net operating income, divide by greater average cost of capital (down payment + loan portion bank money) Functional (wear and tear of functionality of building) Location (has much changed in location of building since it was built?) Office building (lease office space, cash flow available) Value of land based on municipality, value of a brand new building. Component of old church must be deducted from value of brand new church (depreciation)