The cost of
construction, at current prices, of a
building having utility equivalent to the
building being appraised , but built with
modern materials and according to current
standards, design and layout.
Replacement cost is
used as one of the appraisal techniques,
states the amount it would cost to replace
an asset at current prices. If the cost of
replacing an asset in its current physical
condition is lower than the cost of
replacing the asset so as to obtain the
level of services enjoyed when the asset was
bought, then the asset is in poor condition
and the firm would probably not want to
replace it.
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