Volume 8, Issue 2, June 2019, Page: 49-54
About the Profits of an Entrepreneur in the Cost Approach
Sergey Viktorovich Gribovsky, Higher School of Economics, St. Petersburg State University of Economics, St. Petersburg, Russia
Received: Mar. 18, 2019;       Accepted: Apr. 22, 2019;       Published: May 15, 2019
DOI: 10.11648/j.eco.20190802.12      View  43      Downloads  17
The article is devoted to one of the debatable problems of the theory and practice of valuation - the calculating of the profit of an entrepreneur in the cost approach to real estate valuation. Discusses the interpretation of the entrepreneur profit as a fair reward for the investor for the risk of investment in the creation of the property and its relationship with the entrepreneur incentive that is the driving force of the development process. The shortcomings inherent in the cost approach are analyzed: the assumption of the instant creation of land improvements and the impossibility of taking into account the risks of investing in the process of calculating their value. The proposed formula for calculating the profit of the entrepreneur for objects with different levels of risk, amount of funding and construction time, allowing to level these shortcomings.
Real Estate, Land, Improvements, Costs, Capital, Valuation, Entrepreneur, Developer, Profit, Incentive, Cost Approach, Cash Flow, Discounting, Imputed Costs, Unrecovered Investments
To cite this article
Sergey Viktorovich Gribovsky, About the Profits of an Entrepreneur in the Cost Approach, Economics. Vol. 8, No. 2, 2019, pp. 49-54. doi: 10.11648/j.eco.20190802.12
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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