Given an annual Net Operating Income of $3,600 and a Capitalization Rate of 12%, what is the Market Value?

To determine the Market Value, the formula used is:

Market Value = Net Operating Income (NOI) / Capitalization Rate (Cap Rate).

In this scenario, you have an annual Net Operating Income of $3,600 and a Capitalization Rate of 12% (or 0.12 in decimal form).

By applying the formula:

Market Value = $3,600 / 0.12

This calculation gives you:

Market Value = $30,000.

This amount correctly reflects the value of the property based on the income it generates and the expected return investors seek, as represented by the capitalization rate. The result signifies how much investors would be willing to pay for the property given the annual income being generated, which aligns perfectly with the expected return rate in the market.