Property Valuation
An appraiser is asked to estimate the value of an income property using a 10-year discounted cash flow analysis. This method is also called:
AA. The cost approach
BB. The direct capitalization method
CC. The yield capitalization (DCF) method✓ Correct
DD. The sales comparison approach
Explanation
The discounted cash flow (DCF) method is a form of yield capitalization where the appraiser estimates the property's projected cash flows over a holding period (e.g., 10 years) plus the reversion (sale) value at the end, then discounts them back to present value using a discount rate. This is more complex than direct capitalization (NOI ÷ Cap Rate) and is used for complex income properties.
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