Norman Muhling, owner of the 50-room Muhling Inn, wants to have his lodging facility appraised using the cost approach. He provides you with the following information:

k ee Similar parcels of land on which his facility is located have been selling for

$50,000 per acre. His property consists of a building and five acres of land.

The lodging building cost $1,000,000 to construct 20 years ago. He believes that, if properly maintained, the building should have a useful life of another 20 years.

3. The appropriate building construction index was 110 when the facility was built. Today, the same index is 280.
4. Very recent refurbishing of guestrooms at the Muhling Inn cost $4,000 per room.
Required:
1. Determine the estimated value of the Muhling Inn using the cost approach.
2. Explain how the value of this lodging facility would change if its estimated remaining life changed.