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eduard
3 years ago
5

A property is being appraised using the income capitalization approach. Annually, it has an estimated gross income of $48,000, v

acancy and credit losses of $3,600, and operating expenses of $15,000. Using a capitalization rate of 8%, what is the property’s value (rounded up to the nearest $1,000)?
Business
1 answer:
lions [1.4K]3 years ago
4 0

Answer:

$368,000

Explanation:

In order to appraise the property using the capitalization approach, we must first determine a net cash flow:

net cash flow = $48,000 - $3,600 - $15,000 = $29,400

Now we calculate the property value using the perpetuity formula:

property value = net cash flow / capitalization rate = $29,400 / 8% = $367,500 which we must round up to $368,000

A property is being appraised using the income capitalization approach. Annually, it has an estimated gross income of $48,000, vacancy and credit losses of $3,600, and operating expenses of $15,000. Using a capitalization rate of 8%, what is the property's value (rounded up to the nearest $1,000)?

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