Real Estate Math
A North Dakota agricultural operation has net farm income of $85,000/year. A buyer expects a 6.5% capitalization rate. What would the income approach yield for the farm value?
A$1,100,000
B$1,200,000
C$1,307,692✓ Correct
D$1,400,000
Explanation
Value = NOI / Cap rate = $85,000 / 0.065 = $1,307,692. To solve this, multiply the relevant values: $85,000 at 6.5%.. The correct answer is $1,307,692.. This is a common calculation on the North Dakota real estate exam.
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