Property Management
An apartment building's capitalization rate increases from 6% to 7% while the NOI remains the same. What happens to the property's value?
AThe value increases
BThe value decreases✓ Correct
CThe value remains the same
DThe value doubles
Explanation
Value = NOI ÷ Cap rate. As the cap rate increases (from 6% to 7%), the denominator increases, so the resulting value decreases. A higher cap rate reflects more risk or lower market demand, which reduces value.
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