CFA Practice Question
When using the net income approach in real estate valuation, if inflation is passed through, then the appraisal price will most likely:
A. increase.
B. decrease.
C. remain unchanged.
Explanation: Inflation could make NOI grow at the inflation rate over time. As long as inflation is passed through, it will not affect valuation because the market cap rate also incorporates the inflation rate.
User Contributed Comments 1
| User | Comment |
|---|---|
| MonuPanda | What is the meaning of pass through? Does it mean by passing inflation calculation |