Answer: The capitalization rate is 12.5 %
Explanation:
To calculate the capitalization rate, we use the formula:
[tex]\text{Rate of capitalization}=\frac{\text{Income}}{\text{Value of property}}\times 100[/tex]
We are given:
Net operating income = $ 43,750
Value of property = $ 350,000
Putting values in above equation, we get:
[tex]\text{Rate of capitalization}=\frac{43,750}{350,000}\times 100\\\\\text{Rate of capitalization}=12.5\%[/tex]
Hence, the capitalization rate is 12.5 %
