What is the fifth step in estimating depreciation by the capitalization of income method?

The fifth step in estimating depreciation by the capitalization of income method involves dividing the improvement value by the cost new. This calculation is crucial as it helps determine the ratio of the current value of the improvements to their original cost. This ratio is then utilized to derive a depreciation rate, which is essential for assessing the current value of the property accurately.

Understanding this step is important because it ties directly into the overall process of valuating property based on income potential while accounting for depreciation. By analyzing this ratio, assessors can reflect the impact of wear, tear, and obsolescence on the property's value. The other steps in the process lead up to this point, ensuring that the assessor has gathered all necessary information to make informed calculations regarding depreciation.