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Assume a property (land and building) sold three years ago for $500,000. Further assume that real...

Assume a property (land and building) sold three years ago for $500,000. Further assume that real estate values have increased 4% per year since then. Assume that the land in currently worth $150,000 and that the replacement cost for the existing improvements is $700,000. Finally assume that the current improvments are half-way through their economic service life. 1) Estimate the current value of the building based on its prior sale. 2) Estimate the current value of the building based on the cost method. 3) Comment on whether the building would be replaced if destroyed.

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