Question

An apartment building has a land value set at $30,000. The investor recently bought the property for $150,000. Assuming an economic life for the improvement to be 35 years, using the straight-line approach, what would be the value of the property after 14 years?

Answer 1

$102,000

Explanation:

Given:

Set land value = $30,000

Buying cost of the property = $150,000

Now,

The Improvement Value = Buying cost - Land value

or

The Improvement Value = $150,000 - $30,000 = $120,000

Now,

Depreciation per year =
`\frac{\textup{Improvement value}}{\textup{Economic life}}`

or

Depreciation per year =
`\frac{\textup{120,000}}{\textup{35}}`

or

Depreciation per year = $3,428.57

Therefore,

The depreciated over 14 years = $3,428.57 × 14 yrs = $48,000

Hence,

the value of property after 14 years will be

= $150,000 - $48,000

= $102,000