Replacement cost new estimates are an essential component in the cost approach for the appraisal of industrial facilities and evcValuation has extensive knowledge in applying various replacement cost new methodologies, which helps deliver a credible and useful appraisal report
At evcValuation, one of our core benefits to clients is our breadth of knowledge, experience and understanding of various appraisal methodologies used to effectively produce valuation reports with utility and value. In the cost approach, the cost-to-capacity method is one way to develop replacement cost new estimates for entire industrial facilities.
The basic principle of the cost-to-capacity method is that costs for facilities of similar technologies and configurations vary nonlinearly with capacity. The known cost of a facility of similar technology and configuration, but with a different capacity, is used to estimate the replacement cost new of the subject facility being appraised. The nonlinear relationship is accounted for in the cost estimate by applying an exponent, referred to as a scale factor.
The cost-to-capacity method allows evcValuation to develop replacement cost new estimates for complex facilities in a reliable and practical manner. When applying the cost-to-capacity method, the staff of evcValuation considers various factors including, but not limited to, the following:
- The technology and configuration of a facility being appraised must be similar to a comparable facility with a known historical cost
- The scale factor applied must appropriately reflect the technology of both the facility with the known cost and subject facility for which replacement cost new is being developed
- The scale factor utilized should be applicable specifically to the range of capacities for the facility with the known cost and subject facility for which replacement cost new is being developed
evcValuation’s ASA-accredited valuation specialists are experienced in the application of the cost-to-capacity method for clients with industrial facility appraisal needs. And with over 50 years of combined experience, we have a relevant approach to understanding technology factors essential to this type of valuation analysis.
Contact evcValuation today at 262-788-9331 to explore your valuation options and let our reputation and commitment help you achieve your goals.
