Real Estate Math
A property's effective gross income is $108,000 per year. Operating expenses are $42,000. At a 7% cap rate, what is the estimated value?
A$942,857✓ Correct
B$1,542,857
C$600,000
D$857,143
Explanation
NOI = EGI – Operating Expenses = $108,000 – $42,000 = $66,000. Value = NOI ÷ Cap Rate = $66,000 ÷ 0.07 = $942,857 (rounded to nearest dollar).
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