What is the formula for the cost approach to value?

The correct formula for the cost approach to value is represented as RCN (Replacement Cost New) minus D (Depreciation) plus LAND (value of the land) equals VALUE. This approach is based on the premise that a property's value can be ascertained by determining the cost to replace the improvements (buildings and structures) and then adjusting for any loss in value due to depreciation, while also incorporating the value of the land on which the property is situated.

In practical application, the value of the property is calculated by first estimating how much it would cost to construct the property at current prices. Since properties do not usually have the same value as when they were originally built, adjustments are made to account for any wear and tear, physical deterioration, functional obsolescence, or economic obsolescence. This adjustment is critically important to arrive at an accurate appraisal.

Additionally, the valuation of land must be added into the equation, as land typically appreciates and is a significant component of overall property value. Thus, combining these elements gives a comprehensive view of a property's value using this particular approach, aligning with the rationale and methodology specific to the cost approach in real estate appraisal.

The other options do not effectively reflect the core principles of the cost approach