Valuation & AppraisalQuestion 60 of 120
An investment property produces $60,000 in net operating income and the market capitalization rate is 8%. Using the income approach, its indicated value is:
a.$750,000
b.$480,000
c.$600,000
d.$540,000
Explanation
Value equals net operating income divided by the capitalization rate, so $60,000 / 0.08 = $750,000. The income approach is central to valuing income-producing property. A lower cap rate produces a higher value for the same income.
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