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Dear Tutor
how the answer conclude the property is overstated1.373m? If the valuation should include all costs associated with the alternative use, should 2.5m+1.2m+0.173m to get the final FV, so 1.027 m(4.9-3.873m) overstated?
Many thanks
$4.9m is estimated FV in anticipation of a development which is estimated to cost $1.2 for conversion and $0.173 for building regulation. So – as in the published answer:
“the valuation should be $3,527,000 (i.e. $4·9 million – $1·2 million – $173,000)”You can’t just add costs that haven’t been incurred to a carrying amount and call that fair value.
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