1.

VALUATION OF BUILDING
Exercise 1 :
It is a load bearing structure. Age
i) What is the percentage
is 8depreciation
years. Life isby
60straight
years. line method assuming a
salvage value of 10%.
ii) What is the depreciation by constant percentage method if the depreciation
rate is 1.5%
Given: Age=8Year, Life= 60 Year, Salvage Value =10%

Straight Line Method Constant Percentage Method

Formula Formula
𝑟
𝐶−𝑆 Depriciation factor= 1- (1-)n
D= 100
𝐿𝑖𝑓𝑒 r= depreciation rate=1.5%
C=100% S=10% n= Age=8 Year
Life=60Year 1.5
100−10 Depriciation Factor =1-(1- )8
Depriciation per year= =1.5% 100
60 =0.1138
Total Depriciation= Age× Depriciation per year
=1.5×8=12% Depreciation percentage
= 0.1138 x 100 =
11.38%
Exercise 2:
It is a load bearing structure of 20 years old. Plinth area: 1275 sq. ft.
Replacement
rate = Rs. 1,650/sq. ft. What is the depreciated value of the building (Life: 60
years,
i) salvage value = 10%) by
Adopting straight line method?
ii) Adopting constant percentage method?
Given:
Plinth Area=1275 sq. ft. ,Age=20Year, Life= 60 Year, Salvage Value =10% Replacement
Rate= Rs.1650/ sq. ft.
Replacement Value(C)= 1275× 1650 = Rs.21, 03, 750/
Salvage Value=0.1× 21, 03, 750 =Rs.2,10,3 75/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 30th year
D= 𝑆
𝐿𝑖𝑓𝑒 C× ( )m/n
C=100% S=10% 𝐶
210375 20/60
Life=60Year 2103750× ( )
100−10 2103750
Depriciation per year= =1.5% =Rs.9, 76, 475/
60
Total Depriciation= Age× Depriciation per year
=1.5×20=30%
Depriciation= 0.30× 21,0 3,750
= Rs.6,3 1, 125
Depreciated Value=(1-0.3) × 21,0 3,750
0.70× 21,0 3,750
= Rs.14, 72,625
Exercise 3 :
The built up area of a GF building is 5,000 sq. ft. and the carpet area is 4,000 sq. ft.
Plot size is 10,000 sq. ft. What is the FSI? What is plot coverage?
FSI PLOT COVERAGE
𝐵𝑢𝑖𝑙𝑡 𝑢𝑝 𝐴𝑟𝑒𝑎 5000 𝐺.𝐹.𝐶𝑜𝑣𝑒𝑟𝑒𝑑 𝐴𝑟𝑒𝑎
FSI= = =0.5 Plot Coverage= X100
𝑃𝑙𝑜𝑡 𝐴𝑟𝑒𝑎 10000 𝑃𝑙𝑜𝑡 𝐴𝑟𝑒𝑎
= 5000 X100 =50%
10000

Exercise 4 :
A building of 8,000 sq. ft (GF & FF - 4,000 sq. ft. each) is existing in a plot of
8,000 sq.ft. What is the plot coverage?
𝐺.𝐹.𝐶𝑜𝑣𝑒𝑟𝑒𝑑 𝐴𝑟𝑒𝑎
Plot Coverage= X100
𝑃𝑙𝑜𝑡 𝐴𝑟𝑒𝑎
=4000 X100 =50%
8000
Exercise 5 :
20 years factory building of 5,000 sq.ft. is situated in 1 acre of industrial land. The
unit replacement rate of building is Rs. 1,000/-. Assuming the life as 40 years and a
salvage value of 30%, find the depreciated value and salvage value of the building.
Given:
Plinth Area=5000 sq. ft. ,Age=20Year, Life= 40 Year, Salvage Value =30% Replacement
Rate= Rs.1000/ sq. ft.
Replacement Value(C)= 5000× 1000 = Rs.50,00,000/ Salvage Value(S)=
Rs.50,00,000X0.30=Rs.15,00,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 20th year
D= 𝑆
𝐿𝑖𝑓𝑒 C× ( )m/n
150000 𝐶
C=100% S=10% 5000000× (
Life=60Year
100−30 5000000
Depriciation per year= =1.75% =Rs.27,3 8, 613/
40
Total Depriciation= Age× Depriciation per year
=1.75×20=35%
Depriciation= 0.35× 50,00,000
= Rs.17,50, 000
Depreciated Value=(1-0.35) × 5, 00,000
0.65× 50, 00,000
= Rs.32,50, 000
Exercise 6 :

Building area = 1,200 m2 ; Age = 25 years ; Life = 50 years ; Salvage value = Nil ;
Plot area
= 2,000 m2 ; Land rate = Rs. 8,000/m2 ; Replacement cost of building = Rs.
25,000/m2. What is the value?
Given:
,Age=25Year, Life= 50 Year, Salvage Value =0%, Plinth Area=1200 m2 Plot Area=2000m2
Land rate = Rs. 8,000/m2
Land Value = 2000X8000=Rs.1, 60, 00, 000/
Replacement Rate= Rs.25, 00, 000/ m2
Replacement Value= 1200× 25000 = Rs.3, 00, 00,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Since salvage Value is zero , assume
D=
𝐿𝑖𝑓𝑒 p=2%
C=100% C(1-p)n
Life=50Year p= depreciation rate=2% n= Age=25Year
100−0 C=3,00,00,000/
Depriciation per year= =2% Depreciated Value
50 2
Total Depriciation= Age× Depriciation per year = 3,00,00,000 X(1- )25
100
=2×25=50%
Depriciation= 0.50× 3,00,00,000 =Rs.1, 81, 03, 941/
= Rs.1,50,00,000/ Total Value= Land Value
Depreciated Value=(1-0.50) × 3,00,00,000 + Depreciated Value of Building
0.50× 3,00,00,000 = Rs.1,81, 03, 941/+Rs.1, 60, 00, 000
= Rs.1,50,00,000/ =Rs.3,41, 03, 941/
Total Value= Land Value
+ Depreciated Value of Building
= Rs.1,50,00,000/+Rs.1, 60, 00, 000
=Rs.3, 10, 00,000/

Exercise 7:

The plinth area of a RCC roofed load bearing residential building (16
years old) is
1,200 sq. ft. The life of the building as 60 years and a salvage value of 10%,
Questions:

1) Calculate the depreciated value if the unit replacement cost is Rs. 1,800/-.
2) For the above building, if the age of the first floor is 10 years, what
will be the depreciated value of first floor of built up area 1,000 sq. ft.
assuming the unit rate of construction as Rs. 1,400/-.
Given:
Age=16 Year (G.F.),
=10Year(F.F.),
Life= 60 Year, Salvage Value =10%, Plinth Area (G. F.)=1200 sq. ft. Plinth Area (F. F.)=1000
sq. ft., Replacement Rate= G.F.=Rs.1800/ sq. ft. Replacement Value= 1200× 1800 =
Rs.21, 60,000/,
Replacement Rate= F.F.=Rs.1400/ sq. ft.
Replacement Value= 1000× 1400 = Rs.14, 00,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 16th year
D=
𝐿𝑖𝑓𝑒 of G.F.
C=100% C= Rs.21, 60,000/
Life=60Year S= Rs.2,16,000/
100−10 𝑆
Depriciation per year= =1.5% C× ( )m/n
60 𝐶
216000
Total Depriciation= Age× Depriciation per year 21,60, 000× ( )16/60
=1.5×16=24% 21,60,00
Depreciated Value of G.F..: Depriciation= 0.24× =Rs.11, 68,927/
21, 60,000
= Rs.5,18, 400/ Depreciated Value of F.F.
Though the age of F.F. is 10 years, but as
Depreciated Value=(1-0.24) × 21, 60, 000 the foundation is same Depriciation factor
0.76× 21, 60, 000 will remain the same
= Rs.16, 41, 600/ Depreciated cost at the end of 16th year
Depreciated Value of F.F.: Though the age of of G.F.
F.F. is 10 years, but as the foundation is same
Depriciation factor will remain the same.
C= Rs.14,00, 000/ S= Rs.1, 40, 000/
𝑆
Depriciation= 0.24× 14, 00,000 C× ( )m/n
𝐶 1 ,40,000 16/60
= Rs.3,36, 000/ 14, 00, 000×
( )
Depreciated Value=(1-0.24) × 14, 00, 000 14,00,000
0.76× 14, 00, 000 =Rs.7,5 7, 638/
= Rs.10, 64, 000/

Exercise 8 :
A RCC framed structure building consists of front portion (1,500 sq. ft. - 24 years
age) and rear portion (1,200 sq. ft. - 16 years). The replacement unit rate of
construction is Rs. 1,600 per sq. ft. Life 80 years. Salvage value - 10%.
Questions :
•What is the depreciated value of rear portion?

•What if depreciated value of front portion

Given:
Age=24 Year( Front Portion)
=16 Year ( Rear Portion)
Life= 80 Year, Salvage Value =10%, Plinth Area (Front Portion)=1500 sq. ft. Plinth Area (Rear
Potion)=1000 sq. ft., Replacement Rate=Rs.1600/ sq. ft.
Replacement Value( Front Portion)= 1500× 1600 = Rs.24,00,000/,
Replacement Rate= ( Rear Portion)= 1200× 1600 = Rs.19, 20,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 24th year
D=
𝐿𝑖𝑓𝑒 of Front portion
C=100% C= Rs.24,00,000/
Life=80Year S= Rs.2,40, 000/
Depreciated Value of front Portion: 𝑆
C× ( )m/n
𝐶
100−10 2 4 00 00
Depriciation per year= =1.125% 24,00, 000× ( )24/80
80 2400000
Total Depriciation= Age× Depriciation per year =Rs.12,02, 850/
=1.1.25×24=27%
Depreciated Value of Front Portion: Depriciation= Depreciated Value of F.F.
0.27× 24,00, 000 Though the age of F.F. is 10 years, but as
= Rs.6, 48, 000/ the foundation is same Depriciation factor
will remain the same
Depreciated Value=(1-0.27) × 24,00, 000
Depreciated cost at the end of 10th year
0.73× 24,00, 000
of Rear Portion
= Rs.17, 52, 000/ C= Rs.19, 20, 000/
Depreciated Value of Rear portion: As the age of
Rear portion is 10 years, but as the foundation is S= Rs.1,
𝑆 m/n
92, 000/
different Depriciation factor will be different. C× ( )
100−10 𝐶
Depriciation per year= =1.125% 1,92,000
80 19, 20, 000× ( )10/80
19,20,000
Total Depriciation= Age× Depriciation per year
=Rs.14,39, 797/
=1.1.25×16=18%
Depreciated Value of G.F..: Depriciation= 0.18×
19, 20,000
= Rs.3, 45, 600/
Depreciated Value=(1-0.18 × 19,20, 000
0.82× 19, 20, 000
= Rs.15, 74, 400
Exercise 10 :
A load bearing building (1,500 sq.ft.) of 20 years old is existing in a plot of 2,400 sq. ft.
The unit land rate of plot is Rs. 2,000 and replacement unit rate of construction is
Rs. 1,700 sq.ft. It is a collateral security. Salvage value = 10%.

Questions :

1) Determine the market value?

2) Determine the forced value (assume a reduction factor
as 15%)?
Given:
,Age=20Year, Life= 60 Year, Salvage Value =10%, Plinth Area=1500 sq.ft. Plot Area=2400
sq.ft Land rate = Rs. 2000/sq.ft.
Land Value = 2400X2000=Rs.48, 00, 000/
Replacement Rate= Rs.1700/ sq.ft.
Replacement Value= 1700× 1500 = Rs.25,50, 000/ Salvage Value (S)= Rs.2, 55,
000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 20th year
D= 𝑆
𝐿𝑖𝑓𝑒 C× ( )m/n
𝐶
C=100% 255000
Life=60Year 25, 50,000× ( )20640
100−0 2550000
Depriciation per year= =1.5% =Rs.11, 83, 606/
60 Net Present Value= Land Value
Total Depriciation= Age× Depriciation per year
=1.5×20=30%
+ Depreciated Value of Building
Depriciation= 0.30× 25, 50,000
= Rs.48, 00, 000/+Rs.11, 83,606
=Rs.59, 83, 606/ Say Rs.59, 84, 000/
= Rs.7,6 5,000/ Forced Sale Value= Reduction factor =
Depreciated Value=(1-0.30) × 25, 50, 000 15%
0.70× 25, 50, 000 =(100-15)%=85% of
= Rs.17, 85, 000/ N.P.V.
Net Present Value= Land Value =0.85X 59, 84, 000/
=Rs.50, 86, 400/
+ Depreciated Value of Building
= Rs.48, 00, 000/+Rs.17, 85, 000
=Rs.65, 85, 000/
Forced Sale Value= Reduction factor = 15%
=(100-15)%=85% of N.P.V.
=0.85X65, 85, 000/
=Rs.55, 97, 250/
 Exercise 11: A Temporary shed has been constructed for Rs.1, 20,000/.
Assuming the salvage value at the end of 6 years as Rs.30, 000/ determine the
amount of Depriciation and book value by
i) Straight line method
ii) Constant percentage method
iii) Sinking fund method.

1. Straight line method

𝐶−𝑆
D=
𝐿𝑖𝑓𝑒
C=Rs. 1, 20, 000/
S=Rs.30,00,000/
Life=6Year
1,20,000−30,000
Depriciation per year= =Rs.15000/
6
Age in years Depriciation Total Depriciation Book value at the
end of year
0 Rs.1, 20,000/
1 Rs.15,000 Rs.15,000 Rs.1,05,000/
2 Rs.15,000 Rs.30,000 Rs.90,000/
3 Rs.15,000 Rs.45,000 Rs.75,000/
4 Rs.15,000 Rs.60,000 Rs.60,000/
5 Rs.15,000 Rs.75,000 Rs.45, 000/
6 Rs.15,000 Rs.90,000 Rs.30, 000/

2. Constant percentage method

𝑆 1/n
p= 1-( )
𝐶
C= Rs. 1, 20, 000/
S=Rs.30, 00,000/
Life=n=6Year
30000 1/6
Depriciation percentage per year=1-( ) =1-0.7936=0.2064
1,20,000

Age in years Depriciation Total Depriciation Book value at the end

of year
0 120000
1 Rs.24768 Rs.24768 Rs.95232
2 Rs.19656 Rs.44424 Rs.75576
3 Rs.15599 Rs.35255 Rs.59977
4 Rs.12379 Rs.27978 Rs.47598
5 Rs.9824 Rs.22203 Rs.37774
6 Rs.7797 Rs.17621 Rs.29977
 3. Sinking fund method:
𝑖
Ic=
(1+𝑖)𝑛−1
Where n= total life of building

(1+𝑖)𝑛−1 A=
𝑖

Where n= age of building

Depriciation percentage=IcxAx100
Assume rate of interest as 4%
Salvage Value 30000
Sinking Fund Required 90000
Age Depriciation Depriciation Book Value Remarks
& %ge

0 120000 9000+30000
1 15 13500 106500 90000-13500+30000
2 31 27900 92100 90000-27900+30000
3 47 42300 77700 90000-42300+30000
4 64 57600 62400 90000-57600+30000
5 82 73800 46200 90000-73800+30000
6 100 90000 30000 90000-90000+30000

Exercise 12: Calculate the life of the building at which its salvage value will be
about 10%by adopting the following rate of interest in W.D.V. (Written
down Value) method)
i) 2.5%
ii) 5%
i) W.D.V.=C(1-p)n
W.D.V. =0.10C 0.1C= C(1-
p)n 0.1= (1-2.5/100)n
0.1=(0.975)n
Taking logn on both sides
logn0.1=logn(0.975)n
=n. logn(0.975)

𝐥𝐨𝐠𝐧𝟎.𝟏 −𝟐.𝟑𝟎
Or n= = −𝟎.𝟎𝟐𝟓) =92 years
𝐥𝐨𝐠𝐧(𝟎.𝟗𝟕𝟓)
ii) W.D.V.=C(1-p)n
W.D.V. =0.10C
0.1C= C(1-p)n
0.1= (1-5/100)n
0.1=(0.975)n
Taking logn on both sides
 logn0.1=logn(0.95)n
=n. logn(0.95)
𝐥𝐨𝐠𝐧𝟎.𝟏 −𝟐.𝟑𝟎
Or n= = −𝟎.𝟎𝟓𝟏) =45 years
𝐥𝐨𝐠𝐧(𝟎.𝟗𝟓)
Exercise 12: The cost of newly constructed building was Rs.1, 50, 00, 000/. The
life of the building is 75 Years. Determine the depreciation in 30th year of life by
I) Straight line method Constant % age method
II) Sinking fund method at 8% compound interest. The scrap value of the
III) building is 10% of its construction cost.

Given:
,Age=30Year, Life= 75 Year, Salvage Value =10%,
Construction Cost= Rs.1,50,00, 000/
(S)=Scrap value the end of life of building=10%= Rs.15, 00, 000/
Straight line method Constant % age Sinking fund method
method
Formula Depriciatied cost at Total amount of sinking
𝐶−𝑆 the end of 30th year fund required
D= 𝑆 =1, 50,00, 000-15, 00, 000
𝐿𝑖𝑓𝑒 C× ( )m/n = Rs.1, 35,00,000/
C=Rs.1, 50, 00, 000 𝐶 𝑖
15000000 × Ic=𝑛
Life=75Year Depriciation 150000 30/75
( 1+𝑖) −1

per year 15000000 − ( )

Where n= total life of
150000 15000000
=Rs.59, 71, 608 building
75 Say Rs.59, 72, 000/ (1+𝑖)𝑛−1
=𝑅𝑠. 1,8 0,000 Depriciation= A=
𝑖
Total Depriciation 1, 50, 00, 000-59, 72,
= Age× Depriciation per Where n= age of building
000
year = Rs.90, 28,000/ Depriciation
=1, 80, 000×30
=Rs.54, 00, 000/ percentage=IcxAx100
Assume rate of interest as
8%
Ic=0.00025 A=113.28
Rate of depreciation in 30
years
=0.00025x113.28=0.0283
Total Depriciation
in 30years
=0.0283x13500000=
Rs.3,82, 086/
Exercise 11:
Plinth area is 1,000 sq. ft. Replacement rate of construction is Rs. 2,000/sq.
ft. Age is 20 years. Life is 60 years. Salvage value 10%.
Questions:
1) What is replacement value?
2) What is depreciation percentage by straight line method? What is the
3) net present value?
4) What is the depreciation percentage by constant percentage method
assuming a rate of depreciation as 1.5%.
5) What is the balance economic life?

Given:
Age=20Year, Life= 60 Year, Salvage Value =10%, Plinth Area=1000 m2 Replacement Rate=
Rs.2, 000/ sq.ft.
Replacement Value(C)= 1000× 2000 = Rs.20, 00,000/(1)

Straight Line Method Constant Percentage Method

Formula Formula
𝐶−𝑆 Since salvage Value is zero , assume
D=
𝐿𝑖𝑓𝑒 p=2%
C=100% C(1-p)n
Life=20Year p= depreciation rate=2% n= Age=20Year
100−10 C=20,00,000/
Depriciation per year= =1.5% Depreciated Value
60 1.5
Total Depriciation= Age× Depriciation per year = 20,00,000 X(1- )20
=1.5×205=30%(2) 100
Depriciation= 0.30× 20,00,000 =Rs.14, 78, 272/
= Rs.6,00, 000/ Depriciation=Rs.20,00,000-Rs.14,78,272
Depreciated Value=(1-0.30) × 2,00, 000 = Rs.5,71, 728/
571728
0.70× 20, 00, 000 Percentage=
×100=26.08%(4)
= Rs.14, 00, 000/(3) 2000000

Balance Economic Life= 60-20= 40Year

 1. VALUATION OF BUILDING
Exercise 1 :
It is a load bearing structure. Age
i) What is the percentage
is 8depreciation
years. Life isby
60straight
years. line method assuming a
salvage value of 10%.
ii) What is the depreciation by constant percentage method if the depreciation
rate is 1.5%
Given: Age=8Year, Life= 60 Year, Salvage Value =10%

Straight Line Method Constant Percentage Method

Formula Formula
𝑟
𝐶−𝑆 Depriciation factor= 1- (1-)n
D= 100
𝐿𝑖𝑓𝑒 r= depreciation rate=1.5%
C=100% S=10% n= Age=8 Year
Life=60Year 1.5
100−10 Depriciation Factor =1-(1- )8
Depriciation per year= =1.5% 100
60 =0.1138
Total Depriciation= Age× Depriciation per year
=1.5×8=12% Depreciation percentage
= 0.1138 x 100 =
11.38%
Exercise 2:
It is a load bearing structure of 20 years old. Plinth area: 1275 sq. ft.
Replacement
rate = Rs. 1,650/sq. ft. What is the depreciated value of the building (Life: 60
years,
i) salvage value = 10%) by
Adopting straight line method?
ii) Adopting constant percentage method?
Given:
Plinth Area=1275 sq. ft. ,Age=20Year, Life= 60 Year, Salvage Value =10% Replacement
Rate= Rs.1650/ sq. ft.
Replacement Value(C)= 1275× 1650 = Rs.21, 03, 750/
Salvage Value=0.1× 21, 03, 750 =Rs.2,10,3 75/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 30th year
D= 𝑆
𝐿𝑖𝑓𝑒 C× ( )m/n
C=100% S=10% 𝐶
210375 20/60
Life=60Year 2103750× ( )
100−10 2103750
Depriciation per year= =1.5% =Rs.9, 76, 475/
60
Total Depriciation= Age× Depriciation per year
=1.5×20=30%
Depriciation= 0.30× 21,0 3,750
= Rs.6,3 1, 125
Depreciated Value=(1-0.3) × 21,0 3,750
0.70× 21,0 3,750
= Rs.14, 72,625
Exercise 3 :
The built up area of a GF building is 5,000 sq. ft. and the carpet area is 4,000 sq. ft.
Plot size is 10,000 sq. ft. What is the FSI? What is plot coverage?
FSI PLOT COVERAGE
𝐵𝑢𝑖𝑙𝑡 𝑢𝑝 𝐴𝑟𝑒𝑎 5000 𝐺.𝐹.𝐶𝑜𝑣𝑒𝑟𝑒𝑑 𝐴𝑟𝑒𝑎
FSI= = =0.5 Plot Coverage= X100
𝑃𝑙𝑜𝑡 𝐴𝑟𝑒𝑎 10000 𝑃𝑙𝑜𝑡 𝐴𝑟𝑒𝑎
= 5000 X100 =50%
10000

Exercise 4 :
A building of 8,000 sq. ft (GF & FF - 4,000 sq. ft. each) is existing in a plot of
8,000 sq.ft. What is the plot coverage?
𝐺.𝐹.𝐶𝑜𝑣𝑒𝑟𝑒𝑑 𝐴𝑟𝑒𝑎
Plot Coverage= X100
𝑃𝑙𝑜𝑡 𝐴𝑟𝑒𝑎
=4000 X100 =50%
8000
Exercise 5 :
20 years factory building of 5,000 sq.ft. is situated in 1 acre of industrial land. The
unit replacement rate of building is Rs. 1,000/-. Assuming the life as 40 years and a
salvage value of 30%, find the depreciated value and salvage value of the building.
Given:
Plinth Area=5000 sq. ft. ,Age=20Year, Life= 40 Year, Salvage Value =30% Replacement
Rate= Rs.1000/ sq. ft.
Replacement Value(C)= 5000× 1000 = Rs.50,00,000/ Salvage Value(S)=
Rs.50,00,000X0.30=Rs.15,00,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 20th year
D= 𝑆
𝐿𝑖𝑓𝑒 C× ( )m/n
150000 𝐶
C=100% S=10% 5000000× (
Life=60Year
100−30 5000000
Depriciation per year= =1.75% =Rs.27,3 8, 613/
40
Total Depriciation= Age× Depriciation per year
=1.75×20=35%
Depriciation= 0.35× 50,00,000
= Rs.17,50, 000
Depreciated Value=(1-0.35) × 5, 00,000
0.65× 50, 00,000
= Rs.32,50, 000
Exercise 6 :

Building area = 1,200 m2 ; Age = 25 years ; Life = 50 years ; Salvage value = Nil ;
Plot area
= 2,000 m2 ; Land rate = Rs. 8,000/m2 ; Replacement cost of building = Rs.
25,000/m2. What is the value?
Given:
,Age=25Year, Life= 50 Year, Salvage Value =0%, Plinth Area=1200 m2 Plot Area=2000m2
Land rate = Rs. 8,000/m2
Land Value = 2000X8000=Rs.1, 60, 00, 000/
Replacement Rate= Rs.25, 00, 000/ m2
Replacement Value= 1200× 25000 = Rs.3, 00, 00,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Since salvage Value is zero , assume
D=
𝐿𝑖𝑓𝑒 p=2%
C=100% C(1-p)n
Life=50Year p= depreciation rate=2% n= Age=25Year
100−0 C=3,00,00,000/
Depriciation per year= =2% Depreciated Value
50 2
Total Depriciation= Age× Depriciation per year = 3,00,00,000 X(1- )25
100
=2×25=50%
Depriciation= 0.50× 3,00,00,000 =Rs.1, 81, 03, 941/
= Rs.1,50,00,000/ Total Value= Land Value
Depreciated Value=(1-0.50) × 3,00,00,000 + Depreciated Value of Building
0.50× 3,00,00,000 = Rs.1,81, 03, 941/+Rs.1, 60, 00, 000
= Rs.1,50,00,000/ =Rs.3,41, 03, 941/
Total Value= Land Value
+ Depreciated Value of Building
= Rs.1,50,00,000/+Rs.1, 60, 00, 000
=Rs.3, 10, 00,000/

Exercise 7:

The plinth area of a RCC roofed load bearing residential building (16
years old) is
1,200 sq. ft. The life of the building as 60 years and a salvage value of 10%,
Questions:

1) Calculate the depreciated value if the unit replacement cost is Rs. 1,800/-.
2) For the above building, if the age of the first floor is 10 years, what
will be the depreciated value of first floor of built up area 1,000 sq. ft.
assuming the unit rate of construction as Rs. 1,400/-.
Given:
Age=16 Year (G.F.),
=10Year(F.F.),
Life= 60 Year, Salvage Value =10%, Plinth Area (G. F.)=1200 sq. ft. Plinth Area (F. F.)=1000
sq. ft., Replacement Rate= G.F.=Rs.1800/ sq. ft. Replacement Value= 1200× 1800 =
Rs.21, 60,000/,
Replacement Rate= F.F.=Rs.1400/ sq. ft.
Replacement Value= 1000× 1400 = Rs.14, 00,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 16th year
D=
𝐿𝑖𝑓𝑒 of G.F.
C=100% C= Rs.21, 60,000/
Life=60Year S= Rs.2,16,000/
100−10 𝑆
Depriciation per year= =1.5% C× ( )m/n
60 𝐶
216000
Total Depriciation= Age× Depriciation per year 21,60, 000× ( )16/60
=1.5×16=24% 21,60,00
Depreciated Value of G.F..: Depriciation= 0.24× =Rs.11, 68,927/
21, 60,000
= Rs.5,18, 400/ Depreciated Value of F.F.
Though the age of F.F. is 10 years, but as
Depreciated Value=(1-0.24) × 21, 60, 000 the foundation is same Depriciation factor
0.76× 21, 60, 000 will remain the same
= Rs.16, 41, 600/ Depreciated cost at the end of 16th year
Depreciated Value of F.F.: Though the age of of G.F.
F.F. is 10 years, but as the foundation is same
Depriciation factor will remain the same.
C= Rs.14,00, 000/ S= Rs.1, 40, 000/
𝑆
Depriciation= 0.24× 14, 00,000 C× ( )m/n
𝐶 1 ,40,000 16/60
= Rs.3,36, 000/ 14, 00, 000×
( )
Depreciated Value=(1-0.24) × 14, 00, 000 14,00,000
0.76× 14, 00, 000 =Rs.7,5 7, 638/
= Rs.10, 64, 000/

Exercise 8 :
A RCC framed structure building consists of front portion (1,500 sq. ft. - 24 years
age) and rear portion (1,200 sq. ft. - 16 years). The replacement unit rate of
construction is Rs. 1,600 per sq. ft. Life 80 years. Salvage value - 10%.
Questions :
•What is the depreciated value of rear portion?

•What if depreciated value of front portion

Given:
Age=24 Year( Front Portion)
=16 Year ( Rear Portion)
Life= 80 Year, Salvage Value =10%, Plinth Area (Front Portion)=1500 sq. ft. Plinth Area (Rear
Potion)=1000 sq. ft., Replacement Rate=Rs.1600/ sq. ft.
Replacement Value( Front Portion)= 1500× 1600 = Rs.24,00,000/,
Replacement Rate= ( Rear Portion)= 1200× 1600 = Rs.19, 20,000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 24th year
D=
𝐿𝑖𝑓𝑒 of Front portion
C=100% C= Rs.24,00,000/
Life=80Year S= Rs.2,40, 000/
Depreciated Value of front Portion: 𝑆
C× ( )m/n
𝐶
100−10 2 4 00 00
Depriciation per year= =1.125% 24,00, 000× ( )24/80
80 2400000
Total Depriciation= Age× Depriciation per year =Rs.12,02, 850/
=1.1.25×24=27%
Depreciated Value of Front Portion: Depriciation= Depreciated Value of F.F.
0.27× 24,00, 000 Though the age of F.F. is 10 years, but as
= Rs.6, 48, 000/ the foundation is same Depriciation factor
will remain the same
Depreciated Value=(1-0.27) × 24,00, 000
Depreciated cost at the end of 10th year
0.73× 24,00, 000
of Rear Portion
= Rs.17, 52, 000/ C= Rs.19, 20, 000/
Depreciated Value of Rear portion: As the age of
Rear portion is 10 years, but as the foundation is S= Rs.1,
𝑆 m/n
92, 000/
different Depriciation factor will be different. C× ( )
100−10 𝐶
Depriciation per year= =1.125% 1,92,000
80 19, 20, 000× ( )10/80
19,20,000
Total Depriciation= Age× Depriciation per year
=Rs.14,39, 797/
=1.1.25×16=18%
Depreciated Value of G.F..: Depriciation= 0.18×
19, 20,000
= Rs.3, 45, 600/
Depreciated Value=(1-0.18 × 19,20, 000
0.82× 19, 20, 000
= Rs.15, 74, 400
Exercise 10 :
A load bearing building (1,500 sq.ft.) of 20 years old is existing in a plot of 2,400 sq. ft.
The unit land rate of plot is Rs. 2,000 and replacement unit rate of construction is
Rs. 1,700 sq.ft. It is a collateral security. Salvage value = 10%.

Questions :

1) Determine the market value?

2) Determine the forced value (assume a reduction factor
as 15%)?
Given:
,Age=20Year, Life= 60 Year, Salvage Value =10%, Plinth Area=1500 sq.ft. Plot Area=2400
sq.ft Land rate = Rs. 2000/sq.ft.
Land Value = 2400X2000=Rs.48, 00, 000/
Replacement Rate= Rs.1700/ sq.ft.
Replacement Value= 1700× 1500 = Rs.25,50, 000/ Salvage Value (S)= Rs.2, 55,
000/
Straight Line Method Constant Percentage Method
Formula Formula
𝐶−𝑆 Depreciated cost at the end of 20th year
D= 𝑆
𝐿𝑖𝑓𝑒 C× ( )m/n
𝐶
C=100% 255000
Life=60Year 25, 50,000× ( )20640
100−0 2550000
Depriciation per year= =1.5% =Rs.11, 83, 606/
60 Net Present Value= Land Value
Total Depriciation= Age× Depriciation per year
=1.5×20=30%
+ Depreciated Value of Building
Depriciation= 0.30× 25, 50,000
= Rs.48, 00, 000/+Rs.11, 83,606
=Rs.59, 83, 606/ Say Rs.59, 84, 000/
= Rs.7,6 5,000/ Forced Sale Value= Reduction factor =
Depreciated Value=(1-0.30) × 25, 50, 000 15%
0.70× 25, 50, 000 =(100-15)%=85% of
= Rs.17, 85, 000/ N.P.V.
Net Present Value= Land Value =0.85X 59, 84, 000/
=Rs.50, 86, 400/
+ Depreciated Value of Building
= Rs.48, 00, 000/+Rs.17, 85, 000
=Rs.65, 85, 000/
Forced Sale Value= Reduction factor = 15%
=(100-15)%=85% of N.P.V.
=0.85X65, 85, 000/
=Rs.55, 97, 250/
 Exercise 11: A Temporary shed has been constructed for Rs.1, 20,000/.
Assuming the salvage value at the end of 6 years as Rs.30, 000/ determine the
amount of Depriciation and book value by
i) Straight line method
ii) Constant percentage method
iii) Sinking fund method.

1. Straight line method

𝐶−𝑆
D=
𝐿𝑖𝑓𝑒
C=Rs. 1, 20, 000/
S=Rs.30,00,000/
Life=6Year
1,20,000−30,000
Depriciation per year= =Rs.15000/
6
Age in years Depriciation Total Depriciation Book value at the
end of year
0 Rs.1, 20,000/
1 Rs.15,000 Rs.15,000 Rs.1,05,000/
2 Rs.15,000 Rs.30,000 Rs.90,000/
3 Rs.15,000 Rs.45,000 Rs.75,000/
4 Rs.15,000 Rs.60,000 Rs.60,000/
5 Rs.15,000 Rs.75,000 Rs.45, 000/
6 Rs.15,000 Rs.90,000 Rs.30, 000/

2. Constant percentage method

𝑆 1/n
p= 1-( )
𝐶
C= Rs. 1, 20, 000/
S=Rs.30, 00,000/
Life=n=6Year
30000 1/6
Depriciation percentage per year=1-( ) =1-0.7936=0.2064
1,20,000

Age in years Depriciation Total Depriciation Book value at the end

of year
0 120000
1 Rs.24768 Rs.24768 Rs.95232
2 Rs.19656 Rs.44424 Rs.75576
3 Rs.15599 Rs.35255 Rs.59977
4 Rs.12379 Rs.27978 Rs.47598
5 Rs.9824 Rs.22203 Rs.37774
6 Rs.7797 Rs.17621 Rs.29977
 3. Sinking fund method:
𝑖
Ic=
(1+𝑖)𝑛−1
Where n= total life of building

(1+𝑖)𝑛−1 A=
𝑖

Where n= age of building

Depriciation percentage=IcxAx100
Assume rate of interest as 4%
Salvage Value 30000
Sinking Fund Required 90000
Age Depriciation Depriciation Book Value Remarks
& %ge

0 120000 9000+30000
1 15 13500 106500 90000-13500+30000
2 31 27900 92100 90000-27900+30000
3 47 42300 77700 90000-42300+30000
4 64 57600 62400 90000-57600+30000
5 82 73800 46200 90000-73800+30000
6 100 90000 30000 90000-90000+30000

Exercise 12: Calculate the life of the building at which its salvage value will be
about 10%by adopting the following rate of interest in W.D.V. (Written
down Value) method)
i) 2.5%
ii) 5%
i) W.D.V.=C(1-p)n
W.D.V. =0.10C 0.1C= C(1-
p)n 0.1= (1-2.5/100)n
0.1=(0.975)n
Taking logn on both sides
logn0.1=logn(0.975)n
=n. logn(0.975)

𝐥𝐨𝐠𝐧𝟎.𝟏 −𝟐.𝟑𝟎
Or n= = −𝟎.𝟎𝟐𝟓) =92 years
𝐥𝐨𝐠𝐧(𝟎.𝟗𝟕𝟓)
ii) W.D.V.=C(1-p)n
W.D.V. =0.10C
0.1C= C(1-p)n
0.1= (1-5/100)n
0.1=(0.975)n
Taking logn on both sides
 logn0.1=logn(0.95)n
=n. logn(0.95)
𝐥𝐨𝐠𝐧𝟎.𝟏 −𝟐.𝟑𝟎
Or n= = −𝟎.𝟎𝟓𝟏) =45 years
𝐥𝐨𝐠𝐧(𝟎.𝟗𝟓)
Exercise 12: The cost of newly constructed building was Rs.1, 50, 00, 000/. The
life of the building is 75 Years. Determine the depreciation in 30th year of life by
I) Straight line method Constant % age method
II) Sinking fund method at 8% compound interest. The scrap value of the
III) building is 10% of its construction cost.

Given:
,Age=30Year, Life= 75 Year, Salvage Value =10%,
Construction Cost= Rs.1,50,00, 000/
(S)=Scrap value the end of life of building=10%= Rs.15, 00, 000/
Straight line method Constant % age Sinking fund method
method
Formula Depriciatied cost at Total amount of sinking
𝐶−𝑆 the end of 30th year fund required
D= 𝑆 =1, 50,00, 000-15, 00, 000
𝐿𝑖𝑓𝑒 C× ( )m/n = Rs.1, 35,00,000/
C=Rs.1, 50, 00, 000 𝐶 𝑖
15000000 × Ic=𝑛
Life=75Year Depriciation 150000 30/75
( 1+𝑖) −1

per year 15000000 − ( )

Where n= total life of
150000 15000000
=Rs.59, 71, 608 building
75 Say Rs.59, 72, 000/ (1+𝑖)𝑛−1
=𝑅𝑠. 1,8 0,000 Depriciation= A=
𝑖
Total Depriciation 1, 50, 00, 000-59, 72,
= Age× Depriciation per Where n= age of building
000
year = Rs.90, 28,000/ Depriciation
=1, 80, 000×30
=Rs.54, 00, 000/ percentage=IcxAx100
Assume rate of interest as
8%
Ic=0.00025 A=113.28
Rate of depreciation in 30
years
=0.00025x113.28=0.0283
Total Depriciation
in 30years
=0.0283x13500000=
Rs.3,82, 086/
Exercise 11:
Plinth area is 1,000 sq. ft. Replacement rate of construction is Rs. 2,000/sq.
ft. Age is 20 years. Life is 60 years. Salvage value 10%.
Questions:
1) What is replacement value?
2) What is depreciation percentage by straight line method? What is the
3) net present value?
4) What is the depreciation percentage by constant percentage method
assuming a rate of depreciation as 1.5%.
5) What is the balance economic life?

Given:
Age=20Year, Life= 60 Year, Salvage Value =10%, Plinth Area=1000 m2 Replacement Rate=
Rs.2, 000/ sq.ft.
Replacement Value(C)= 1000× 2000 = Rs.20, 00,000/(1)

Straight Line Method Constant Percentage Method

Formula Formula
𝐶−𝑆 Since salvage Value is zero , assume
D=
𝐿𝑖𝑓𝑒 p=2%
C=100% C(1-p)n
Life=20Year p= depreciation rate=2% n= Age=20Year
100−10 C=20,00,000/
Depriciation per year= =1.5% Depreciated Value
60 1.5
Total Depriciation= Age× Depriciation per year = 20,00,000 X(1- )20
=1.5×205=30%(2) 100
Depriciation= 0.30× 20,00,000 =Rs.14, 78, 272/
= Rs.6,00, 000/ Depriciation=Rs.20,00,000-Rs.14,78,272
Depreciated Value=(1-0.30) × 2,00, 000 = Rs.5,71, 728/
571728
0.70× 20, 00, 000 Percentage=
×100=26.08%(4)
= Rs.14, 00, 000/(3) 2000000

Balance Economic Life= 60-20= 40Year