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Meaning of Different Terms used in estimating and costing
2024-05-08 08:43:33
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- Scrap value is the valve of dismantled materials at the end of utilization period. The scrap value of a building may be about 10% of its total cost of construction. The cost of dismantling and removal of the rubbish materials is deducted from the sale of the useable materials to get the scrap value. Scrap value is not counted as minus quantity.
- Salvage value is the value at the end of the utility period without being dismantled. A machine after the completion of its usual span of life or when it become uneconomic, may be sold and one may purchase the same for use for some other purpose, the sale value of machine is the salvage valve. It does not include the cost of removal, sale etc. Normally, the scrap value or salvage value of a property or an asset has got some positive figure, but it may also be zero or negative. As for example, the scrap value or a RCC structure will be negative, as dismantling and removal will be costly.
- Market value is the amount which can be obtained at any particular time from the open market if the property is put for sale. The market value will differ from time to time according to demand and supply. The value also changes from time to time for various miscellaneous reasons such as changes in industry, changes on fashions, means of transport, cost of material and labor etc. The market value, higher than the book value, indicates profit for the seller.
- Book value is the amount shown in the account book after allowing necessary depreciations. The book value of a property at a particular year is the original cost minus the amount of depreciation allowed per year and will be gradually reduced year to year and at the end of the utility period of the property the book will be only scrap value.
- Rateable value is the annual letting value of property, which is obtained after deducting the amount of yearly repairs from the gross income. Municipal and other taxes are charged at a certain percentage on the retable value of the property.
- Assessed value is the value of a property recorded in the register of a municipality in order to determine the amount of municipal taxes to be collected from the owner of the property.
- Distress value or forced value is the value a property is sold at a lower price than the market value at that time.
- Replacement value is the present value of a property or portions thereof if these have to be replaced at the current market rates.
- Potential value is the value when a property is capable of fetching more return due to its alternative use or by advantageous planning or by providing some development woks, such inherent value of a property.
- Monopoly value is the value such that in case land scarce little remaining for sale or certain properties posses special advantages with respect to adjoining property due to its location, frontage, size, shape the owner may demand fancy price. Such of a property is known as monopoly value.
- Sentimental value is the value when a property is sold or purchase at a higher value then the market value due to playing of sentiments in the mind of owner or the purchaser, this is known as sentimental value.
- Obsolescence is the value of property or structure becomes less by its becoming out of date in style, in structure in design etc, and this is termed as obsolescence. The obsolescence may be due to the reasons such as progress in arts, changes in fashions, changes in planning ideas, new inventions, improvements in design technique, etc. a machine of old design may becomes obsolete, though it may be in good running condition and its value will be less. Thus, though the property is physically sound, it may become functional inadequate and its economical return becomes less.
- Annuity is the annual periodic payments for repayments of the capital amount invested by a partly. These annual payments are either paid at the end of the year or at the beginning of the year, usually for a specified number of years. If the amount of annuity is paid for a definite number of periods or years, it is known as annuity certain. In such cases the amount of annuity will be higher, the lesser the number of the years the higher will be the amount and vice-versa to clear up to the whole amount of capital If the amount of annuity is paid at beginning of each period of year and payments continued for definite number of periods, it is known as annuity due. If the payments of annuity continue for indefinite period, it is known as perpetual annuity.
- Capital cost is the total cost of construction including land, or the original total amount required to possess a property. It is the original cost and does not change, while value of a property is the present cost which may be calculated by methods of valuation.
- Capitalized value is the capitalized value of a property is the amount of money whose annual interest at the highest prevailing rate of interest will be equal to the net income from the property. To determine the capitalized value of a property it is required to known the net income from the property and the highest prevailing rate of interest. Capitalized value is equal to the product of net annual return and year’s purchase.
- Year’s purchase is defined as the capital sum required to be invented in order to receive an annuity of Rs. 1 at certain rate of interest. Thus, year’s purchase = 1/i where, i is rate of interest in decimal. Year’s purchase will be reduced in such a way that income of the property will provide both for interest on the capital and for accumulation of the sinking fund to replace the capital. In such cases, year’s purchase = 1/(i+S), where S is sinking fund to replace Rs 1 at the end of given period.
- Sinking fund is that type of fund which is gradually accumulated by way of periodic on annual deposit for the replacement of the building or structure at the end of its useful life. The amount of annual installation of the sinking fund may be found by I= S*i /((1+i)n -1), where n is time period in year. If rate of redemption is given then Ic=i/(1+i)n or if the rate of sinking fund is given then Ic= i/(1+i)n -1 where Ic is co efficient of sinking fund and Sis the total amount of sinking fund.
- Depreciation is the gradual exhaustion of the usefulness of a property. This may be defined as the decrease or loss in the value of a property due to structural deterioration use, life wear and tear, decay and obsolescence, etc. If the amount of depreciation being known, the present value of property can be calculated after deducting the total amount of depreciation from the original cost. The depreciation may be physical, functional or locational
- Mortgage deed: An owner can borrow money against the security of his property, and for that purpose he is required to grant to the party advancing the loan. The loan is required to be returned in specified time. The person who takes the loans is known as Mortgager and the person who advances the loan is known as Mortgagee and the relevant document for the mortgage transaction is known as Mortgage deed. When the loan is fully repaid together with interest the mortgager has got the right to free his property from the mortgage, and this is known as Equity of redemption. The amount of loan will depend in the valuation of the property; usually 50 to 70% of the valuation is advanced as loan. Freehold property means that, the owner is in obsolete possession of the property and the owner can utilize the same in any manner, he likes subject to the rules and regulations of GON and local authorities. He may use the property by himself, he may grant leases, etc for a short period or any period.
- The person who enjoys the easements over a property is called Dominant owner and the owner over whose property the easements are enjoyed is called servant owner.
- Leasehold property indicates the use of it may be allowed by the original owner as per lease document. The owner of a freehold property may give permission to any other person to use his freehold which is known as giving property lease. The person who takes lease is known as lessee or leaseholder and the owner who grants lease is known as lesser.
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sentiment value
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distress value
replacement value
assessed value
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