Property Valuation
In Montana, the 'direct capitalization method' of the income approach differs from the 'discounted cash flow' (DCF) method in that:
ADirect capitalization uses multiple years' income projections while DCF uses only one year
BDirect capitalization divides a single year's income by a cap rate for a quick value indication; DCF projects income over a holding period and discounts future cash flows to present value✓ Correct
CDirect capitalization is only used for residential properties
DDCF is only used for agricultural properties
Explanation
Direct capitalization (Value = NOI / Cap Rate) uses a single year's stabilized income. DCF projects income and reversionary value over a multi-year holding period, discounting all future cash flows to present value using a discount rate.
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