Property Valuation
An appraiser determines a property has a capitalization rate of 8% and a NOI of $80,000. What is the estimated value?
A$640,000
B$1,000,000✓ Correct
C$800,000
D$6,400,000
Explanation
Value = NOI ÷ Cap Rate = $80,000 ÷ 0.08 = $1,000,000. The capitalization rate converts expected income into an estimate of property value by dividing the net operating income by the rate of return investors require.
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