Current Affairs · Real Estate and Valuation
An entrepreneur owns a small boutique hotel in a tourist town that has consistent occupancy. The owner approaches a bank for an expansion loan, offering the hotel as collateral. No other hotels of this size have been sold in the area recently. Which valuation method should the bank insist upon to get a realistic assessment of the asset?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The Circle Rate Method provided by the local registrar's office.
- 2The Cost Method based solely on the historical price of land and building construction.
- 3The Profit-based (Earnings) Method using the audited accounts of recent years.✓
- 4The Sales Comparison Method using nearby residential bungalows as a proxy.
Correct answer
The Profit-based (Earnings) Method using the audited accounts of recent years.
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