Property Valuation
The 'discounted cash flow' (DCF) analysis in Arizona commercial real estate appraisal differs from direct capitalization in that:
AThey are the same method with different names
BDCF 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✓ Correct
CDCF is used for residential properties only
DDirect cap is more accurate than DCF for all property types
Explanation
DCF analysis projects income and expenses for each year of a holding period plus a terminal (reversion) value, then discounts all cash flows to present value at a yield rate. Direct capitalization uses a single year's stabilized NOI divided by a cap rate.
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