Real Estate MathQuestion 116 of 120
An investor's rental property produces net operating income (NOI) of $24,000 per year. Using a capitalization rate of 8%, what is the indicated value?
a.$192,000
b.$1,920,000
c.$300,000
d.$32,000
Explanation
The income approach value equals NOI divided by the cap rate: $24,000 / 0.08 = $300,000. A lower cap rate would produce a higher value for the same income.
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