Property Valuation
A cap rate of 5% versus a cap rate of 10% on the same NOI would indicate:
AThe same property value
BA 5% cap rate results in a higher value; 10% cap rate results in a lower value✓ Correct
CA 10% cap rate results in a higher value
DCap rates do not affect value
Explanation
Value = NOI ÷ Cap Rate. A lower cap rate (5%) means investors accept less return, implying they pay more for the asset (higher value). A higher cap rate (10%) means investors require more return, paying less (lower value).
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