Question
You calculated that a building you are currently appraising will need a new elevator within ten years. The building will not be functional without a
You calculated that a building you are currently appraising will need a new elevator within ten years. The building will not be functional without a working elevator in the long-run. The elevator will cost $120,000 and you are planning to set aside 1/10 in each of the upcoming next years. How should this information influence your appraising outcome? (4 Points)
a The investment is not leading to an improved value, it should hence lead to an increase of the operational expenses.
b The investment aims to prevent a loss in value, it should hence lead to an increase in capital expenditures.
c No cash flow will be observed within the next 12 months, it should, therefore, not be included in the calculations.
d The need for a new elevator makes the property different from any other property. We can hence not find a comparison and are unable to use the direct capitalization approach.
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