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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. 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
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