You are a potential buyer of a small industrial site in Oakville. You can buy land in the area for a variety of prices and build your own plant at $60.00 per square foot or $645.84 per square metre, or buy an existing facility that is 4 years old. The facility in question has an area of 35,000 square feet or 3,252 square metres on a 100,000 square foot or 9,290 square metre site. The building has an estimated economic life of 40 years, but the site as a whole is not as well located as the vacant site you could buy, being situated next to a scrapyard. For this locational deficiency, an adjustment of 5% to the building is advised.

Sales prices of vacant industrial sites in the area have been:
#1 - $1,000,000 for a site of 100,000 sq. ft. or 9,290 sq. metres.
#2 - $ 990,000 for a site of 90,000 sq. ft. or 8,361 sq. metres.
#3 - $ 990,000 for a site of 110,000 sq. ft. or 10,219 sq. metres.
#4 - $1,050,000 for a site of 105,000 sq. ft. or 9,755 sq. metres.
#5 - $1,200,000 for a site of 120,000 sq. ft. or 11,148 sq. metres.

Complete the Worksheet on the following page.

Solving the Cost Approach Case:

A. Use Land Sales to Determine Land Value
B. Determine Land Value for Subject Property
C. Determine the Cost of a New Building
D1. Determine Physical Depreciation
D2. Determine Functional Obsolescence
D3. Determine External Obsolescence
D4. Determine Depreciated Building Value
E. Determine the Market Value of Property