Certainly! To determine the value of the building based on the Net Operating Income (NOI) and the capitalization rate (cap rate), follow these steps:
1. Understand the formula: The value of a building can be calculated using the formula:
[tex]\[
\text{Value} = \frac{\text{NOI}}{\text{Cap Rate}}
\][/tex]
2. Identify the given values:
- The Net Operating Income (NOI) is [tex]$\$[/tex]72,000$.
- The capitalization rate (cap rate) is [tex]$8\%$[/tex], which can be written as a decimal: [tex]$0.08$[/tex].
3. Substitute the values into the formula:
[tex]\[
\text{Value} = \frac{72,000}{0.08}
\][/tex]
4. Perform the division:
[tex]\[
\text{Value} = 900,000
\][/tex]
Therefore, the value of the building is \$900,000.
