Finance
A NH commercial property sells at a 6.5% cap rate. If the same property's NOI increases by 10% next year, and the cap rate remains the same, the property's value would:
ADecrease by 10%
BIncrease by approximately 10%✓ Correct
CRemain unchanged since the cap rate is the same
DDouble in value
Explanation
Value = NOI / Cap rate. If NOI increases by 10% and the cap rate remains constant, value increases by approximately 10%. Example: if NOI was $65,000 and value was $1,000,000 (6.5% cap), after 10% NOI increase: $71,500 / 0.065 = $1,100,000, a 10% increase.
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