If NOI remains 50,000 and cap rate increases from 8% to 9%, the property's value would:

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Multiple Choice

If NOI remains 50,000 and cap rate increases from 8% to 9%, the property's value would:

The value of an income-producing property is found by dividing net operating income by the capitalization rate. With NOI fixed at 50,000, the value at an 8% cap rate is 50,000 / 0.08 = 625,000. If the cap rate rises to 9%, the value becomes 50,000 / 0.09 ≈ 555,556. When the cap rate increases while NOI stays the same, value falls because buyers require a higher return for the same income stream. So the property's value decreases to about 555,556.

The value of an income-producing property is found by dividing net operating income by the capitalization rate. With NOI fixed at 50,000, the value at an 8% cap rate is 50,000 / 0.08 = 625,000. If the cap rate rises to 9%, the value becomes 50,000 / 0.09 ≈ 555,556. When the cap rate increases while NOI stays the same, value falls because buyers require a higher return for the same income stream. So the property's value decreases to about 555,556.

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