Question Capitalization Rate for Property

I have a question to this questions in Schweser Notes Self-Test: Alternative Investments Riley also provides certain operating data for the hotel and the shopping center properties. The market value of the hotel is $2,500,000. Net operating income for the upcoming year is expected to be $275,000, and is expected to grow at a constant annual rate of 6% for the foreseeable future. 4. What is the market capitalization rate for the hotel? A. 5% B. 6% C. 11% Right Answer = C But why? If you look on page 27 Schweser Notes Chapter Income Property Analysis and Appraisal (Study Sessio 13) you can see that the market capitalization rate = r - g In my opionion is r = 275/2500 = 0,11 g = 6 so market capitalization rate = 0,11 - 0,06. What’s wrong in my considerations??? Please help :frowning:

I found my error :slight_smile: 275= r-g Damn I am an idiot :slight_smile: Too much learning without a breack :frowning:

right…capitalization rate is r-g, or R0,