Property Valuation
The 'band of investment technique' for deriving a cap rate uses:
AAverage of three comparable cap rates from the market
BWeighted average of the mortgage constant (debt component) and equity dividend rate (equity component) based on typical financing ratios✓ Correct
CThe risk-free rate plus a risk premium
DThe discount rate from DCF analysis
Explanation
The band of investment technique calculates a capitalization rate as the weighted average of the debt component (loan-to-value ratio × mortgage constant) and equity component (equity ratio × equity dividend rate), reflecting the interests of both lenders and equity investors.
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