CFA Practice Question

There are 139 practice questions for this study session.

CFA Practice Question

The income approach to estimating a property's market value:
A. Uses the sales prices of properties that are similar to the subject property as the basic input variable.
B. Views a property's value as the present value of its future net operating income.
C. Ignores the effect of property taxes on an investment.
Explanation: Under the income capitalization approach, the estimated value of a property's net future operating income is the capitalized value of the constant NOI:

Estimated value = Annual Net Operating Income / Market Capitalization Rate

The market cap rate is derived from a benchmark NOI and benchmark price, or from the NOIs and prices of comparable properties. Property taxes are deducted in the calculation of net operating income (NOI)

User Contributed Comments 1

User Comment
shiva5555 tricky, it ignores income taxes not property taxes.
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