Reply to post by Russ Carlson, on February 18, 2001 at 12:53:41:
"In working with the CostÂofÂCure Report Form (folder) I discovered a major inadequacy in instruction and modeling. The use here is probably so obscure that very few, if any, appraisers apply the suggested [compounding] method."
Just as well then. Compounding is not supported by the appraisal literature as a method to estimate present value, is not descriptive of what is actually happening, and while it trends in the right direction is subjuect to huge overestimation because we don't knowwhat the trem and rate should be.
"Years to parity" is descriptive of the age difference between the appraised and replacement trees but, depending on the rate chosen may have no use as the term in a compounding exercise. Since we don't know what value is we don't know what inputs in terms of rate and term to make. If we did know we wouldn't need to compound to estimate it. Circular logic. Fatal error. Does not compute.
Seriously, these exercises are not elementary math or elementary concepts. Tree appraisers have no business using them if they don't understand them. A few more paragraphs in the form or guide will NOT provide tht understanding. But the exercise doesn't reliably work anyway so it doesn't matter.
Now, what's really missing from CoC is explicit, descriptive and consistent Specise and Location depreciation to put RCM, TFM and CoC in comparable terms. There were several lengthy threads on that... I won't repeat it all here.
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