Property Valuation
A property generates a net operating income of $50,000 and is valued using a 5% cap rate. What is the estimated value?
A$250,000
B$500,000
C$750,000
D$1,000,000✓ Correct
Explanation
Value = NOI ÷ Cap Rate = $50,000 ÷ 0.05 = $1,000,000. This is the fundamental income capitalization formula. A lower cap rate yields a higher value; a higher cap rate yields a lower value.
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