Assume You Have Been Hired to Appraise a Local Hospital

Multiple Choice

Assume you have been hired to appraise a local hospital. Your best estimate of the reproduction (or replacement) cost of the building is $3,700,000. However, upon evaluating the use of land in the local area, you have deemed the value of the site to be worth an additional $800,000. If the building has depreciated by $500,000 over its lifetime and there are no further depreciation losses due to external or functional obsolescence, what is the indicated value of the hospital using the cost approach?

A) $2,400,000
B) $3,700,000
C) $4,000,000
D) $4,500,000