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Level II
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Alternative Investments
Alternative Investments
Hard
Crestwood Real Estate Fund acquires a commercial property for $15 million with a net operating income (NOI) of $1.2 million. Comparable properties trade at a cap rate of 7%. Using the direct capitalization method, the property is most likely:
A
Undervalued, since $1.2M / 0.07 = $17.14M exceeds the purchase price
B
Overvalued, since $1.2M / 0.07 = $17.14M is below the purchase price
C
Fairly valued, since the cap rate of 8% equals the market rate
D
Undervalued, since $15M x 0.07 = $1.05M is less than the NOI
Select an answer to continue
Tags
#real-estate
#cap-rate
#direct-capitalization
#valuation
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