Which approach is focused primarily on the costs associated with creating or replacing an asset?

The cost approach is centered on estimating the costs associated with creating or replacing an asset. This method involves determining the current cost to construct a new asset of similar utility, considering both direct and indirect costs. You subtract any depreciation or obsolescence from this total to arrive at the value of the asset. It is particularly effective for valuing specialized properties or assets that do not frequently change hands in the marketplace, where comparable sales data might be limited.

In contrast, the sales comparison approach relies on market data from similar properties that have sold, providing a value based on actual transactions. The income approach focuses on the potential income generation of a property, evaluating it based on projected cash flows and capitalization rates, making it inappropriate for situations where cost is the primary concern. Lastly, a data analysis approach is broader and encompasses various methods of analyzing data, but it does not specify the cost evaluation as a primary focus.