Suppose that you are attempting to value an income producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 7.5%. If the projected first year net operating income (NOI) for the subject property is $135,500, what is the indicated value of the subject using direct capitalization?
A) $144,985.00
B) $150,555.56
C) $1,806,666.67
D) $9,033,333.33

Question

Quizplus · Accepted Answer

The indicated value of the subject property using direct capitalization can be calculated by dividing the net operating income (NOI) by the capitalization rate. Thus, $135,500 / 0.075 = $1,806,666.67.

Suppose That You Are Attempting to Value an Income Producing