The going-in cap rate,or overall capitalization rate,is a measure of the relationship between a property's current income stream and its price or value.Which of the following statements regarding cap rates is true?
A)It is a measure of total return since it accounts for future cash flows from operations and expected appreciation (depreciation)in the market value of the property.
B)It is a discount rate that can be applied to future cash flows.
C)It is analogous to the dividend yield on a common stock.
D)It is the main determinant of a property's value.

Question

Quizplus · Accepted Answer

The statement that is true is C- it is analogous to the dividend yield on a common stock. Cap rate is a measure of a property's income in relation to its value and is often used as a way to compare different investment opportunities. It is not a measure of total return (A) as it only takes into account the current income stream, not future cash flows or expected appreciation. It is not a discount rate (B) as it does not take into account future cash flows. While it is often used in the determination of a property's value (D), it is not the only determinant.

The Going-In Cap Rate,or Overall Capitalization Rate,is a Measure of the Relationship