Private Real Estate – Cost Approach (why no adjustment?)

On the top of my head, incurable is ‘covered’ in the calculation to deduct (effective age / remaining economic life) * (cost to replace – curable).

ahh i thought you are referring to one of the Q in schweser’s mock because those figures look familiar.

Basically the formula is as follows ( I couldn’t calculate your example because ur incurable is included in the curable figure):

(Replacement cost + developer’s profit)
– curable deterioration
– (effective age / total economic life) * (replacement cost + developer’s profit – curable deterioration)
– functional obsolescence
– location obsolescence
– economic obsolescence
+ market value of land

Again, I’ve double checked and i can confirm that incurable is indeed effective age / total economic life so if incurable increases the effective age increases as well.

I need to look at the question again when i’m back and get back to you on that.

From what I could remember, you deduct (effective age / remaining economic life) * (developer’s cost and profit – curable) from “developer’s cost and profit” before proceeding to other items.