---
title: "Valuation of a cinema hall (land Rs 5 crore)"
subject: "Construction Management"
chapter: 13
key: "semester_8/construction_management:value-cinema-hall-2070-magh"
source: https://www.bctengineer.com/q/semester_8/construction_management/value-cinema-hall-2070-magh
site: BCT Engineering
---

# Valuation of a cinema hall (land Rs 5 crore)

Construction Management · Chapter 13: Valuation

- Asked in: 2070 Magh, 8 marks
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_8/construction_management/value-cinema-hall-2070-magh
- Whole chapter: https://www.bctengineer.com/md/semester_8/construction_management/chapter-13

## Question

Workout the value of a Cinema hall from the following data.

i) Cost of Land = Rs 5 crore
ii) Gross income = Rs. 2 crore
iii) Operating Cost = 40% of Gross income
iv) Repair and Maintenance of machineries = 5% of Capital Cost where capital cost is Rs. 40 lakh
v) Repair of Hall = 5% of Gross income
vi) Sinking fund for machineries whose life is estimated 25 years @ 4% after allowing 10% scrap value.
vii) Insurance premium = Rs 50000 per year
viii) Assume years purchase for 60 years at 8% and redemption of capital at 10%.

## Short answer

Annual gross income Rs2,00,00,000; total outgoings Rs93,36,443 including machinery sinking fund Rs86,443; net income Rs1,06,63,557. Land interest Rs40,00,000 leaves Rs66,63,557; capitalized with dual-rate YP 12.449 (8%, 10%, 60 years) gives Rs8,29,52,790; add land Rs5,00,00,000; value about Rs13.30 crore.

## Answer

**Method:** income method with a dual-rate YP. The interest on land is deducted from the net income (land is not redeemed), the remainder is capitalised, and the land is added.

**Annual outgoings**

| Item | Calculation | Rs |
|---|---|---|
| Operating cost | 40% × 2,00,00,000 | 80,00,000 |
| Repair and maintenance of machines | 5% × 40,00,000 | 2,00,000 |
| Repair of hall | 5% × 2,00,00,000 | 10,00,000 |
| Insurance premium | | 50,000 |
| Sinking fund for machinery | see below | 86,443 |
| **Total outgoings** | | **93,36,443** |

**Sinking fund for machinery:** depreciable amount = 90% × 40,00,000 = Rs 36,00,000, n = 25 years, i = 4%:

$$
I = \frac{36{,}00{,}000 \times 0.04}{(1.04)^{25}-1} = Rs\ 86{,}443
$$

**Net income** = 2,00,00,000 − 93,36,443 = Rs 1,06,63,557

**Interest on land** (8% of 5,00,00,000) = Rs 40,00,000
**Net income from building and plant** = 1,06,63,557 − 40,00,000 = Rs 66,63,557

**Year's purchase** (60 years, 8%, redemption 10%):

$$
YP = \frac{1}{0.08 + \dfrac{0.10}{(1.10)^{60}-1}} = 12.449
$$

**Capitalised value of building and plant** = 66,63,557 × 12.449 = Rs 8,29,52,790

**Value of cinema hall** = 8,29,52,790 + 5,00,00,000 = Rs 13,29,52,790

**Answer: Value of the cinema hall is about Rs 13.30 crore.**

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Machinery costs Rs 40 lakh with 10% scrap value. What amount is covered by the sinking fund?
   A. Rs 40,00,000
   B. Rs 36,00,000
   C. Rs 4,00,000
   D. Rs 44,00,000
   Answer: B. Only 90% of cost = Rs 36,00,000 needs to be redeemed; 10% is recovered as scrap. (Key point: Depreciable amount for machinery)

2. Which formula gives the yearly sinking fund for the machinery (25 years, 4%)?
   A. 36,00,000 x 0.04 / ((1.04)^25 - 1)
   B. 36,00,000 x 0.04 x 25
   C. 36,00,000 / 25
   D. 36,00,000 x (1.04)^25
   Answer: A. I = D x i / ((1+i)^n - 1) = Rs 86,443 per year. (Key point: Sinking fund installment)

3. Net income is Rs 1,06,63,557. After deducting 8% interest on land of Rs 5 crore, what is left for building and plant?
   A. Rs 66,63,557
   B. Rs 1,46,63,557
   C. Rs 40,00,000
   D. Rs 1,06,63,557
   Answer: A. 1,06,63,557 - 40,00,000 = Rs 66,63,557. (Key point: Land interest and net income)

4. How is the value of the cinema hall obtained?
   A. Net income x YP only
   B. Building and plant income x YP plus land value
   C. Gross income x YP minus land
   D. Land value x YP
   Answer: B. 66,63,557 x 12.449 = Rs 8.30 crore, plus land Rs 5 crore gives about Rs 13.30 crore. (Key point: Final value)

## Related in Construction Management

- [Valuation of a cinema hall (land Rs 15 lakh)](https://www.bctengineer.com/question.md?key=semester_8%2Fconstruction_management%3Avalue-cinema-hall-2077) — Construction Management, chapter 13, asked 2×