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If a property will produce net cash flow that grows at a rate of 1.5% per year in perpetuity, and the opportunity cost of capital is 12%, then what is the "cap rate" (net cash flow / property value) for
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30 votes
30 votes
If a property will produce net cash flow that grows at a rate of 1.5% per year in perpetuity, and the opportunity cost of capital is 12%, then what is the "cap rate" (net cash flow / property value) for the property?

(a) 8%.
(b) 10%.
(c) 10.5%.
(d) 12%.

User Amy Doxy
by
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1 Answer

20 votes
20 votes

Answer:

(c) 10.5%.

Step-by-step explanation:

Calculation to determine what is the "cap rate

Using this formula

x 1/r-g

Let plug in the formula

1/12-1.5

User Ezzatron
by
3.2k points
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