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A public utility building of 5000 m2 was constructed 5 years before, on a site of 1 hectare. The present value of open land in that location is Rs. 100/m2 and present construction cost of such building is Rs. 2500/m2. If the value of the building is assumed to be depreciating at a constant rate of 6 percent per annum, then the present value of the property using ‘Valuatin by Cost Method’ is ______ (in Rs. Lakh) (rounded off to one decimal place).
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- 10.7 lakh
- 1.7 lakh
- 101.7 lakh
- 11.7 lakh
Correct Option: C
Present Land value = Rs. 100 × 10,000 = Rs. 10 lakhs
Cost of Construction of the building = Total Area × Per Sq m
Cost of Construction = 5,000 × 2500 = 125 lakhs
Depreciation rate = 6% Value of the building after depreciation in 5 years = 125 (1 – r)n = 125 × (1 – 0.06)5 = 91.7 lakhs
Present Value of Property = Land Value + Building Value = 10+ 91.7 = 101.7 lakhs
