9. Which of the following BEST describes a capitalization rate?
A) Rate at which the amount of depreciation in a property is measured.
B) Rate of return an income property will produce.
C) Mathematical value determined by a sales price.
B) Rate of return an income property will produce.
In the income approach to appraisal, the capitalization rate is the relationship of the net annual income to the appraised value, expressed by the following formula: Net annual income ÷ Appraised value = Capitalization rate. Therefore, it expresses the return an income property will produce.