Property Valuation
A capitalization rate of 5% versus 10% on similar properties would indicate that the property with a 5% cap rate:
AGenerates twice the income of the 10% property
BIs valued at twice the amount of the 10% cap rate property for the same NOI✓ Correct
CHas a lower value relative to its income
DHas higher operating expenses
Explanation
Value = NOI ÷ Cap Rate. For the same NOI, a lower cap rate produces a higher value: $100,000 ÷ 5% = $2,000,000 versus $100,000 ÷ 10% = $1,000,000. Lower cap rates typically indicate lower risk and higher investor demand, which is common in prime locations.
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