Valuation

Replacement Cost

Definition

What is Replacement Cost?

The current cost of replacing an asset with one of similar utility.

Example in practice

Building a comparable factory today would cost ₦30 billion.

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The price at which an asset could trade in the market at a given time.

An estimate of an asset's underlying economic worth based on expected cash flows, assets, or earning power.

An estimate of an asset's appropriate value under specified assumptions or accounting standards.

Present value of expected cash inflows minus present value of expected cash outflows.

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