CFA Practice Question

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CFA Practice Question

Using the following data and the direct capitalization approach, an analyst estimates that the market value of an income-producing property is $2,750,000.

Annual gross potential rental income = $400,000
Annual property operating expenses = $100,000
Annual vacancy and collection losses = $50,000

The capitalization rate used by the analyst to get the market value of the property is:

A. 9.09%.
B. 10.91%.
C. 12.73%.
Correct Answer: A

User Contributed Comments 4

User Comment
Sandy69 250000/2750000 = .09091
pooh2005 400000-100000-50000=250000
Oarona pooh2005:You made a typo error in the denominator. it should be 2750000 instead of 5750000
khalifa92 eye of the tige
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