Real Estate Math
A property generates $75,000 annual NOI. Using a 7% cap rate, what is the property value? If the cap rate increases to 8%, what is the new value?
A$1,071,429 at 7%; $937,500 at 8%
B$937,500 at 7%; $1,071,429 at 8%✓ Correct
C$750,000 at 7%; $937,500 at 8%
D$1,050,000 at 7%; $937,500 at 8%
Explanation
At 7%: $75,000 / 0.07 = $1,071,429. At 8%: $75,000 / 0.08 = $937,500. As cap rates rise, values fall.
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