This is the cost of replacing the property with new property that is not exactly the same but reasonably meets current specifications. The basic problem here is that the business firm would get a new building for an old one. However, the arguments in favour of this method are that (a) The property in its current state is performing its function adequately and new property is the only possible replacement, and (b) Mostly losses are partial and the cost of repairs is not reduced by physical depreciation.