Property Valuation
A property generates an NOI of $60,000. Comparable properties sell at a 5% cap rate. What is the indicated value using the income approach?
A$300,000
B$600,000
C$1,200,000✓ Correct
D$3,000,000
Explanation
Value = NOI ÷ Cap Rate = $60,000 ÷ 0.05 = $1,200,000. A lower cap rate reflects higher property values relative to income, typically seen in prime markets with strong investor demand.
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