Real Estate Math
A Wyoming property's NOI is $42,000 per year. Using a 7% cap rate, what is the estimated value?
A$294,000
B$600,000✓ Correct
C$2,940,000
D$420,000
Explanation
Value = NOI / Cap Rate = $42,000 / 0.07 = $600,000. This is the income capitalization formula. A lower cap rate produces a higher value; a higher cap rate produces a lower value for the same NOI.
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