Cost Approach Method

STAGE 3 IDENTIFY TECHNOLOGY VALUE

ERICA YESENIA BETANCOURT

NATIONAL OPEN AND DISTANCE UNIVERSITY ACADEMIC AND RESEARCH VICE-RECTOR COURSE: VALUATION AND NEGOTIATION OF TECHNOLOGY CODE: 212032

COST APPROACH METHOD

The cost approach is a real estate valuation method that estimates that the price a buyer would have to pay for a property is equal to the cost of constructing an equivalent building. In the cost approach, the value of the property equals the cost of the land, plus total construction costs, less depreciation. Offers more accurate market value when a property is new than through alternative methods. The cost approach is one of the three real estate valuation methods; the others are the income approach and the comparable approach.

KEY RECOMMENDATIONS

The profitable approach to real estate valuation considers that the value should be equal to the full cost of building an equivalent structure. The cost approach takes into account the cost of the land, plus construction costs, less depreciation. The cost approach is considered less reliable than other real estate valuation methods, but it can be useful in some cases, such as when evaluating new construction or a single home with few comparisons.

PROCESSES RELATED AND MATHEMATICAL FORMULAS TO THE CALCULATION OF THE VALUE OF TECHNOLOGY USING THE SELECTED METHOD

A cost-benefit analysis regarding the introduction of new technology can consider the following elements:

1. Clarify the purpose of the acquisition
2. State why it is desirable
3. Describe the process that will be replaced
4. Point out the risks or problems that may arise or worsen if the current process continues to be used
5. Describe how the new technology application would work
6. Indicate what are the benefits that it will bring
7. Mention what problems or risks that its adoption may represent
8. Analyze whether or not the new technology will improve the transparency of the electoral process

ANSWER TO THE QUESTION: HOW CAN COMPANIES CREATE VALUE FROM THEIR INNOVATION?

EWhen a company initiates or reinforces its commitment to innovation, what it is doing is nothing more than generating changes (which, as we all know, generate resistance). Therefore, before anything else, the organization must be clear about the reason that drives it to innovate. In other words, it will be necessary to identify the triggers to start the innovation adventure, as well as make a call to action that generates the need for change within the company. The motivations to innovate can be several: to respond to a changing environment (which can be translated into changes in customer tastes, in technology or in the appearance of new regulations), to avoid the trap of "commoditization", grow or create competitive advantages… whatever the reasons, it is convenient to make them explicit

MAIN TYPES OF COST APPROACH EVALUATIONS:.

1. Reproduction method: This version considers the cost of replicating the property and pays attention to the use of raw materials.
2. replacement method. In this case, it is assumed that the new structure has the same function but with newer materials, using existing construction methods and updated design.

ADVANTAGES AND DISADVANTAGES OF THE COST APPROACH

1. The cost approach may be less reliable than revenue and comparable methodologies in practice. Requires certain assumptions, including the assumption that there is enough land available for the buyer to build an equivalent property
2. Despite these limitations, there are some cases where the cost approach can be useful and even necessary. It is very helpful for you to evaluate the various components of your real estate separately when it comes to a property that is new or different from others in unique ways.