The 'discounted cash flow' (DCF) analysis in Arizona commercial real estate appraisal differs from direct capitalization in that:
Why DCF projects year-by-year cash flows and a reversion value and discounts them to present value, while direct cap uses one year's stabilized NOI Is Correct
Answer B: DCF projects year-by-year cash flows and a reversion value and discounts them to present value, while direct cap uses one year's stabilized NOI
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
Key Property Valuation Terms in This Question
People Also Study
Related Arizona Questions
- An Arizona property produces a Net Operating Income (NOI) of $120,000 per year. Using a capitalization rate of 6%, what is the estimated value?Property Valuation
- An Arizona property has annual gross income of $96,000, vacancies of 8%, and operating expenses of $32,000. If the cap rate is 7%, what is the value?Real Estate Math
- An Arizona property has a potential gross income of $108,000, a 6% vacancy rate, and $36,000 in operating expenses. If properties in the area sell at a 7.5% cap rate, what is the estimated value?Real Estate Math
- An Arizona appraiser using the income approach to value a commercial property calculates a capitalization rate of 7%. If the net operating income (NOI) is $105,000, what is the estimated property value?Property Valuation
- In the income approach, a property generates $36,000 annual net operating income (NOI). If the capitalization rate is 6%, what is the estimated value?Property Valuation
- An Arizona income property generates gross rents of $90,000 per year. Vacancy and credit losses are 5%, and operating expenses are $35,000. What is the Net Operating Income (NOI)?Property Valuation
- Property taxes on an Arizona home valued at $325,000 are assessed at 10% of full cash value with a tax rate of $12 per $100 of assessed value. What is the annual tax bill?Real Estate Math
- An Arizona investor buys a rental property for $250,000. Annual rent is $24,000, operating expenses are $8,000, and annual mortgage payments are $14,400. What is the annual cash flow before taxes?Real Estate Math
Key Terms to Know
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
Study This Topic
Practice More Arizona Real Estate Questions
1,400+ questions covering all exam topics. Start free — no signup required.
Take the Free Arizona Quiz →