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Basic Question 8 of 8
A small office building that recently sold for $175,000 generates annual net operating income of $27,500. What is the market value of this building under the income approach assuming a capitalization rate of 12%?
B. $257,300
C. $260,133
A. $229,167
B. $257,300
C. $260,133
User Contributed Comments 6
| User | Comment |
|---|---|
| johntan1979 | And it sold for $175,000... phew what a deal! |
| gill15 | THats not good deal....market value is 229 000 |
| schweitzdm | Wouldn't it be a deal if you were the buyer? |
| janglejuic | You don't know if it's a deal yet, because it doesn't say how much it cost to repair and rehab to bring to rent ready status + maintenance tax and other costs. Remember that transaction costs and management fees are high. |
| ankurwa10 | formula => mkt value = NOI/capitalization rate |
| Inaganti6 | just like a perpetuity. V0 = D0/ r |
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Learning Outcome Statements
explain the investment characteristics of real estate investments
CFA® 2025 Level I Curriculum, Volume 5, Module 4.