Property Valuation
An Alaska appraiser calculates a capitalization rate of 8% for an income property with an NOI of $40,000. Using direct capitalization, the indicated property value is:
A$320,000
B$400,000
C$500,000✓ Correct
D$560,000
Explanation
The income capitalization formula is Value = NOI ÷ Cap Rate. $40,000 ÷ 0.08 = $500,000. Direct capitalization converts a single year's NOI into a value indication by dividing by the appropriate cap rate.
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