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9 October, 08:40

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 11.44%. If the projected first-year net operating income (NOI) for the subject property is $44,500, what is the indicated value of the subject using direct capitalization?

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  1. 9 October, 09:29
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    Based on the calculation made, the indicated value is $3,889.86014

    Explanation:

    Using direct capitalization method, indicated value can be calculated using the formula below:

    Value = Annual net operating income NOI/Capitalization rate

    = $44500/11.44%

    Value = $3,889.86014

    Based on the calculation made above, the indicated value is $3,889.86014.
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