Lesson 2 – Index Factors (Valuation of Personal Property and Fixtures)
Using Assessors' Handbook Section 581 (Equipment Index, Percent Good, and Valuation Factors)
Appraisal Training: Self-Paced Online Learning Session
Check Your Knowledge
The exercises below are to be worked by participants to ensure comprehension of information discussed in this lesson. Additionally, it will help prepare certified property tax appraisers for the final examination that must be taken upon completion of this training session in order to receive appraisal training credit.
Before you start, please print the exercises using the “Print Questions” link below so you can work through the exercises on your own. After you work through the exercises, the solution can be viewed by clicking on the blue plus sign immediately following the question on the right hand side of the page. Additionally, when you have completed all the exercises, you may print all of the solutions using the “Print Questions with Answers” link below.
While all the exercises shown below use lien date 2011 for illustrative purposes, it must be remembered that it is the lien date for which values are sought that determines which AH 581 – and associated factors – will be used.
Print Questions | Print Questions with Answers | View Accessible Text Version
Open All Solutions Close All SolutionsExercise 1
Determine the index factor to be used in estimating the reproduction cost new (RCN) of the following types of equipment and fixtures, as of lien date 2011 (January 1).
| Problem number | Equipment & Fixtures | Acquisition Year | Index Factor |
|---|---|---|---|
| a. | Commercial | 2007 | |
| b. | Commercial | 2005 | |
| c. | Industrial | 2006 | |
| d. | Industrial | 2004 | |
| e. | Construction | 2008 | |
| f. | Construction | 2003 | |
| g. | Agricultural | 2009 | |
| h. | Agricultural | 2002 |
Solution
a. 106 = 2011 AH 581 Table 1 (page 3), row: 2007 Year Acquired, column: “Average”.
b. 116 = 2011 AH 581 Table 1 (page 3), row: 2005 Year Acquired, column “Average”.
c. 108 = 2011 AH 581 Table 2 (page 8), row: 2006 Year Acquired, column “Average”.
d. 115 = 2011 AH 581 Table 2 (page 8), row: 2004 Year Acquired, column “Average”.
e. 103 = 2011 AH 581 Table 3 (page 10), row: 2008 Year Acquired, column “Construction”.
f. 125 = 2011 AH 581 Table 3 (page 10), row: 2003 Year Acquired, column “Construction”.
g. 102 = 2011 AH 581 Table 3 (page 10), row: 2009 Year Acquired, column “Agricultural”.
h. 128 = 2011 AH 581 Table 3 (page 10), row: 2002 Year Acquired, column “Agricultural”.
Exercise 2
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for retail department store equipment purchased and installed in 2006, for $250,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $250,000 × 1.11
RCN = $277,500
Locate the index factor for commercial equipment with a 2006 acquisition year in Table 1 (page 3) of the January 2011 AH 581.
2006 Year Acquired = 111
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $250,000 × 1.11 = $277,500
Exercise 3
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for a forklift purchased and delivered in 2010, for $25,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $25,000 × 1.00
RCN = $25,000
Locate the index factor for commercial equipment with a 2010 acquisition year in Table 1 (page 3) of the January 2011 AH 581.
2010 Year Acquired = 100
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $25,000 × 1.00 = $25,000
Exercise 4
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for furniture manufacturing equipment purchased and installed in 2002, for $250,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $250,000 × 1.20
RCN = $300,000
Locate the index factor for industrial equipment with a 2002 acquisition year in Table 2 (page 8) of the January 2011 AH 581.
2002 Year Acquired = 120
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $250,000 × 1.20 = $300,000
Exercise 5
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for sheet metal manufacturing equipment purchased and installed in 2009, for $750,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $750,000 × 1.00
RCN = $750,000
Locate the index factor for industrial equipment with a 2009 acquisition year in Table 2 (page 8) of the January 2011 AH 581.
2009 Year Acquired = 100
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $750,000 × 1.00 = $750,000
Exercise 6
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for a diesel fired heater (non-mobile construction equipment) purchased and delivered in 2006, for $30,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $30,000 × 1.09
RCN = $32,700
Locate the index factor for construction equipment with a 2006 acquisition year in Table 3 (page 10) of the January 2011 AH 581.
2006 Year Acquired = 109
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $30,000 × 1.09 = $32,700
Exercise 7
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for dairy farm equipment (non-mobileagricultural equipment) purchased and installed in 2007, for $85,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $85,000 × 1.10
RCN = $93,500
Locate the index factor for agricultural equipment with a 2007 acquisition year in Table 3 (page 10) of the January 2011 AH 581.
2007 Year Acquired = 110
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $85,000 × 1.10 = $93,500
Exercise 8
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for an excavator (non-mobile construction equipment) purchased new and delivered in 2001, for $250,000?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $250,000 × 1.28
RCN = $320,000
Locate the index factor for construction equipment with a 2001 acquisition year in Table 3 (page 10) of the January 2011 AH 581.
2001 Year Acquired = 128
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $250,000 × 1.28 = $320,000
Exercise 9
What is the reproduction cost new (RCN), as of lien date 2011 (January 1), for a farm sprayer (non-mobile agricultural equipment) purchased and delivered in 2003, for $62,500?
Solution
RCN = Cost × Index Factor (converted to decimal equivalent)
RCN = $62,500 × 1.26
RCN = $78,750
Locate the index factor for agricultural equipment with a 2003 acquisition year in Table 3 (page 10) of the January 2011 AH 581.
2003 Year Acquired = 126
Calculate the reproduction cost new (RCN) for the equipment by multiplying its acquisition cost by the decimal equivalent of the index factor (percent) found in the preceding step.
RCN = $62,500 × 1.26 = $78,750