Which technique requires the development of discount rate and effective tax rate for land value estimation?

The residual technique involves estimating the value of land by determining the residual value of the property after accounting for the costs of development and other expenses. This method is particularly useful in situations where the property is being developed for generating income.

To accurately assess land value using this method, it is essential to establish both a discount rate and an effective tax rate. The discount rate reflects the return expected on an investment in the property, accounting for factors such as risk and time value of money. The effective tax rate captures the ongoing costs related to property taxes after development. Once these rates are established, the appraiser can calculate the potential income generated from the developed property and deduct associated costs to isolate the value of the land itself.

The other techniques mentioned—like the income approach, cost approach, and market comparison—do not specifically require the development of these particular financial metrics for land valuation. The income approach focuses more on the net income potential of the property, the cost approach bases value on the costs of replacement or reproduction, and the market comparison method relies on analyzing comparable sales data rather than discount rates or tax considerations. Hence, the residual technique is the correct choice due to its reliance on those financial specifics for evaluating land value.