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Doctors Medicines MCQs Q&A

  1. Development method of valuation
  2. Valuation based on profit
  3. Rental method of valuation
  4. Valuation based on cost
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1 Answers

Option 3 : Rental method of valuation

Explanation:

Development Method of Valuation

  • This method of Valuation is used for the properties which are in the underdeveloped stage or partly developed and partly underdeveloped stage.
  • If a large place of land is required to be divided into plots after providing for roads, parks, etc, this method of valuation is to be adopted. In such cases, the probable selling price of the divided plots, the area required for roads, parks, etc, and other expenditures for development should be known.
  • If a building is required to be renovated by making additional changes, alterations, or improvements, the development method of Valuation may be used.

Valuation based on the profit

  • This is very much similar to the rental method of valuation.
  • It is most applicable in the case of the valuation of hotels, shops, and cinema.
  • Net profit can be realized in the form of rent.
  • In this method is net profit is worked out after deducting all possible outgoings including interest of capital investment and also remuneration of labor rendered by the owner.

Rental Method of Valuation

  • In this method, the net income by way of rent is found out by deducting all outgoing from the gross rent.
  • A suitable rate of interest as prevailing in the market is assumed and a Year’s purchase is calculated.
  • This net income multiplied by Year’s Purchase gives the capitalized value or valuation of the property.
  • This method is applicable only when the rent is known or probable rent is determined by inquiries.

There are the following other Methods of Valuation:

  • Direct Comparisons of the capital value
  • Valuation based on the cost
  • Depreciation method of Valuation
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