Cost Approach Method

Technology Valuation and Negotiation

Cost Approach Method

Presented by: Santiago Santa Serna Tutor: Daniel Eduardo Medina Group: 54 Unit 2 - Stage 3 - Understand technology value

Definition for Cost Approach Method

The cost approach is defined as a method of valuation of products and goods, where it considers that the value that a property can have could be equal to or greater than the cost of the land, this also considering the costs of the lot or land that has been acquired, this method provides very precise values to goods with specific characteristics such as when it is new and has few variables.

Main types of cost assessment

Replacement method

The cost approach is calculated as follows

Reproduction method

In this version, the cost of the construction of a replica type building is considered, considering a responsible use of all raw materials.

For this type of method, new structures are considered, with a construction process that considers the use of better quality materials and with much more modern construction methods in designs and other variables.

cost – depreciation + land value = property value

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When the cost approach can be used

Advantages and disadvantages of the cost approach

The costs of materials must be clear to have a much more precise cost, because if you do not have accurate information, about materials and land in terms of costs you could not have very precise estimates

New Construction

Insurance

The fundamental method of costing real estate, where the construction of new buildings require a real and accurate estimate on the costs of manufacturing and materials to see the viability of a project and that can be more profitable

Commercial Property