If a property's net operating income is $12,000 per year and an investor seeks a 12% return, what is the property's value?

If a property's net operating income is $12,000 per year and an investor seeks a 12% return, what is the property's value?

• A. $80,000
• B. $100,000
• C. $120,000
• D. $140,000

Answer: (B)

To determine the property's value based on the net operating income (NOI) and the desired return on investment, the formula used is: Property Value = Net Operating Income / Rate of Return Given that the net operating income is $12,000 and the investor is seeking a 12% return, you can substitute these values into the formula: Property Value = $12,000 / 0.12 Calculating that gives: Property Value = $12,000 ÷ 0.12 = $100,000 This calculation demonstrates that the value of the property, based on the given net operating income and the desired rate of return, is indeed $100,000. The other figures do not align with these calculations, making this choice the correct answer for a property valuation based on the specified parameters.

To determine the property's value based on the net operating income (NOI) and the desired return on investment, the formula used is:

Property Value = Net Operating Income / Rate of Return

Given that the net operating income is $12,000 and the investor is seeking a 12% return, you can substitute these values into the formula:

Property Value = $12,000 / 0.12

Calculating that gives:

Property Value = $12,000 ÷ 0.12 = $100,000

This calculation demonstrates that the value of the property, based on the given net operating income and the desired rate of return, is indeed $100,000. The other figures do not align with these calculations, making this choice the correct answer for a property valuation based on the specified parameters.