Property Valuation
The income capitalization approach converts a property's net operating income (NOI) into value using the formula:
AValue = NOI x Capitalization Rate
BValue = NOI / Capitalization Rate✓ Correct
CValue = NOI + Capitalization Rate
DValue = NOI - Operating Expenses
Explanation
In the income capitalization approach, Value = NOI / Capitalization Rate. If a Rhode Island investment property has an NOI of $50,000 and the cap rate is 5%, the value is $1,000,000.
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