Question

To find the value of a property using the income approach to value, if the net operating income and the capitalization rate were known, the appraiser would

a. multiply the net operating income by the capitalization rate.
b. multiply the effective gross income by the capitalization rate.
c. divide the net operating income by the capitalization rate.
d. divide the capitalization rate by the net operating income.

Answer 1

c. divide the net operating income by the capitalization rate.

Step-by-step explanation:

Income approach assumes that the earnings would be at the capitalization rate. Now, the net operating income is a result of operations and the income would be equivalent to the capitalization rate.

Thus, the net value of the property shall be net operating income/ capitalization rate.

This will calculate the total value of operations for which the business is done.