Real Estate Math
A commercial property is valued at $875,000 using a cap rate of 7%. If the NOI increases by $5,000 per year, what is the new estimated value at the same 7% cap rate?
A$880,000
B$946,429✓ Correct
C$942,857
D$875,714
Explanation
Original NOI = $875,000 × 0.07 = $61,250. New NOI = $61,250 + $5,000 = $66,250. New value = $66,250 ÷ 0.07 = $946,428.57 ≈ $946,429.
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