What method is Stacy using to measure depreciation when applying a capitalization rate to an income comparison of similar properties?

The method that Stacy is using to measure depreciation by applying a capitalization rate to an income comparison of similar properties is the capitalized value approach. This method involves determining the value of an income-generating property by applying a capitalization rate to the net operating income it produces.

This approach specifically focuses on how much income the property can generate, rather than just comparing sale prices or construction costs. The capitalization rate is indicative of the expected return on investment and factors in the property's depreciation along with other operating expenses.

By using the capitalized value approach, Stacy is accounting for the income potential of the property while recognizing that depreciation can affect the overall value derived from that income. This makes it a suitable choice for evaluating properties primarily viewed through their ability to generate income.

Other approaches like the replacement cost method or the sales comparison approach focus on different aspects—like the cost to replace or the market pricing of comparable properties—rather than income potential and its capitalization, which is central to understanding depreciation in this context.