Capitalization Rate
According to the Appraisal Institute, it is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the income estimate by an appropriate rate. Investopedia Says:
Also known as the cap rate. The relationship between Cap Rate (R), Income (I), and Estimated Value (V) is as follows:
V = I / R
I = V x R
R = I / V Related Terms:
Capitalization
Interest Rate
Overcapitalization
Present Value |