ESSENTIALS OF VALUE : 
lead into confusion when the term “ value ”’ is used. Both the 
physical and the intangible elements which make up the entire 
property may have been acquired by the outlay of money or 
in exchange for other valuable property. Consequently the 
question of cost deserves consideration and may at times be 
found a fair guide in determining value. Usually the physical 
elements of any property in successful use are worth at least as 
much as it would cost to reproduce them in the condition in 
which they are found at the time of the valuation. At any rate 
a prudent purchaser would desire to know what this cost would 
be and he would be very apt to make it his starting point in 
determining what he could afford to pay for the property. 
The first step therefore in practically every valuation is the 
determination of the cost of the physical elements which go to 
make up the property. 
In making the valuation of the physical properties account 
must be taken: 
1. Of the cost of replacing each inventoried item with a new 
equivalent article. 
2. Of the probable remaining term of usefulness of the item. 
3. Of the probable term of usefulness of the same or an equiv- 
alent new article. 
4. Of the cost of replacing the article with an equivalent 
article at the time when the article will probably be discarded. 
5- In the case of valuation for purchase or sale account 
should also be taken of the accrued depreciation, which will aid 
in determining the present value. 
The Determination of Cost. — The appraiser will therefore 
begin with an inventory of the property which should be in 
sufficient detail to facilitate a cost estimate such as an engineer 
would make who is called upon to construct a duplicate of the 
property to be valued. He will call to aid in making this in- 
ventory the records of the owner and he may find that he need 
only verify or amplify a list of items already enumerated. He 
will then estimate the cost of reproduction and here again he 
should call to aid, if it is available, the record of the cost of con- 
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