The cost approach is the way to go, my friend. It's like when your car breaks down - you gotta look at how much it would cost to get a new one, not how much you could sell your old one for, am I right?
I'm gonna have to go with the cost approach on this one. It's the only one that makes sense when you're talking about replacing something, right? Unless the question is asking about a completely new asset, in which case the market approach might work.
Cost approach, definitely. I mean, how else would you know how much it would take to replace the asset? You can't just pull a number out of thin air, can you?
The income approach sounds interesting, but I'm not sure how that would apply to replacing an asset's service capacity. Isn't that more about the asset's earning potential?
Hmm, I was thinking the market approach might be the right answer. Isn't that the one that looks at what similar assets are selling for on the open market?
I believe it's the income approach. It focuses on the income generated by the asset when determining the amount needed to replace its service capacity.
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