Property Valuation
The terminal cap rate in a DCF analysis for Indiana investment property is used to:
ACalculate the current year's NOI
BEstimate the property's sale price at the end of the holding period by capitalizing the projected NOI in the resale year✓ Correct
CSet the discount rate
DCalculate annual depreciation
Explanation
The terminal (reversion) cap rate is applied to the projected NOI in the final year of the holding period (or the year following) to estimate the property's resale value at the end of the holding period.
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