Which formula represents the cost approach?

The cost approach is based on the premise that the value of a property is equal to the value of the land plus the cost of any improvements made to it. This means that when evaluating a property's worth, an assessor will consider both the value of the land itself and the value added by any structures or enhancements on that land.

An important aspect of the cost approach involves analyzing the various components contributing to the property's overall value. The correct formula highlights that the total value comprises both the land value and the improved value. This method is particularly useful for properties that are unique or not frequently sold in the market, providing a reliable estimation method through quantifiable costs.

In contrast, the other formulas presented might misrepresent how improvements and land values interact or will not accurately capture the cost approach's focus on valuing both land and the improvements altogether. For example, simply adding improved value without clarifying whether costs are represented does not align with the key principles of this evaluation method.