Which of the Following Is Not One of the Three

question 17

Multiple Choice

Which of the following is not one of the three approaches discussed in Chapter 11 to determine the appropriate discount rate or opportunity cost of capital in property valuation?

• A) Historical evidence (such as the NCREIF Index total return history).
• B) Survey evidence (based on what market participants and brokers say investors are looking for).
• C) The average WACC in the REIT industry determined from REIT share price capital returns in the stock market combined with typical commercial mortgage interest rates. (This wasn't in Ch 11, and also you would need to use Total (not capital ) returns from REIT share prices.)
• D) Empirical evidence of property cap rates plus typical rental growth minus depreciation, less typical capital expenditures as a fraction of property value.

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Definitions:

Economies

Systems of production, distribution, and consumption of goods and services among individuals, businesses, and governments within a region or country.

Large Firms

Companies or enterprises that have a large scale of operations, significant market power, and a vast distribution of employees and resources.

Barrier To Entry

Factors that prevent or hinder companies from entering a specific market or industry.

Natural Monopoly

A market condition where due to high fixed or start-up costs, the most efficient number of firms in the industry is one.