If an appraiser estimates a building's replacement cost at $300,000 and its useful life is 60 years, what is the annual depreciation?

To find the annual depreciation of a building, you can use the straight-line depreciation method. This method divides the replacement cost by the useful life of the building.

In this case, the building's replacement cost is $300,000 and its useful life is 60 years. By applying the formula:

Annual Depreciation = Replacement Cost / Useful Life

We substitute the given values:

Annual Depreciation = $300,000 / 60 years = $5,000

This means that each year, the building will depreciate by $5,000 in value. This calculation reflects how the value of the building decreases over time as it ages and is used. Understanding this concept is essential for appraisers and anyone involved in real estate, as it helps in assessing the value and financial viability of properties over their lifespan.