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Cost Approach 38 Replacement Cost vs. Market Value Including Excluding Entrepreneurial Entrepreneurial Profit Profit Replacement Cost New $1,826,641 $1,660,583 Land Value $210,000 $210,000 Replacement Cost New Including Land Value $2,036,641 $1,870,583 Rounded $2,040,000 $1,870,000 Market Value Conclusion $940,000 $940,000 MarketValueas % of RCN Including Land Value 46% 50% Estimate of Depreciation Depreciation is the difference between the replacement cost new of the improvements and their contribution to overall property value on the effective date of the appraisal. Deferred Maintenance No items of deferred maintenance are identified; thus, no deductions for this form of depreciation are necessary. Age -Life Depreciation After deduction deferred maintenance, if any, we use the age -life method to estimate depreciation applicable to the remaining replacement costs. This method includes the loss in value due to physical deterioration and some functional obsolescence based on the age and condition of the improvements. The age -life method is applied on a straight -line basis, by dividing the subject's effective age by its economic. Age -life depreciation for the site improvements is estimated separately from the building improvements, based on their shorter economic lives. Functional Obsolescence Functional obsolescence is a loss in value due to changes in market tastes and standards. In the case of the subject, it is not necessary to make a deduction for additional functional obsolescence over and above that accounted for in the age -life method. External Obsolescence External obsolescence is a loss in value due to external causes, such as imbalances in supply and demand or negative location influences. A deduction for external obsolescence is not considered necessary for the subject. The Glenn Center i H -5 Page 371