Property Valuation
In the income approach to valuation, the capitalization rate (cap rate) is calculated as:
AA. Net Operating Income divided by Value✓ Correct
BB. Gross Rent Multiplier divided by Value
CC. Value divided by Net Operating Income
DD. Potential Gross Income divided by Vacancy
Explanation
The cap rate equals Net Operating Income (NOI) divided by property value (or sale price). Conversely, value equals NOI divided by cap rate.
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