The capitalization rate is equal to the discount rate minus any expected annual growth in income and property value.

Question

Quizplus · Accepted Answer

This statement is true. The capitalization rate, also known as cap rate, is a ratio used to estimate the value of income-producing properties. It is calculated by dividing the property's net operating income by its current market value. The cap rate is determined by the discount rate minus any expected annual growth in income and property value, as higher growth expectations would require a lower cap rate and vice versa.

The Capitalization Rate Is Equal to the Discount Rate Minus