If the Cap Rates Prevailing in a Given Market Are

question 7

Multiple Choice

If the cap rates prevailing in a given market are 10.5%, then how much would you expect a property to sell for in that market if its annual net income were $50,000?

• A) $5,250.
• B) $50,000.
• C) $476,190.
• D) $525,000.

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Definitions:

Acceptable Return

The minimum profit or benefit expected by an investor for the risk taken on an investment.

Income from Operations

Financial performance metric that shows earnings from normal business activities, excluding effects of interest and taxes.

Transfer Price

The price at which goods and services are sold between subdivisions, affiliates, or subsidiaries within the same organization.

Variable Cost

Variable costs are expenses that vary directly with the level of production or business activity, such as raw materials and direct labor.