Replacement cost is defined as

• A. The cost to reproduce an exact duplicate
• B. The cost at current prices to replace the buildings with one of equivalent utility
• C. The depreciated cost of the building
• D. The sum of land value and improvements

Answer: (B)

Replacement cost means the current amount it would cost to construct a building that provides the same utility and function as the existing one, using today’s prices, materials, and building methods. It focuses on what it would cost to recreate a functionally similar structure today, not an exact replica of the original design or materials. Land value is not part of this calculation—the idea is to estimate how much it would cost to replace the improvements themselves with something that serves the same purpose. This differs from reproduction cost, which would try to duplicate the building exactly, and from depreciated cost, which factors in wear and aging. In practice, replacement cost reflects modern construction costs to achieve equivalent utility.