Unlock Your Texas Property Tax Future 2026 – Ace the Consultant Exam with Confidence!

To determine the indicated value of a property using net operating income (NOI) and capitalization rate (cap rate), the formula used is:

Indicated Value = Net Operating Income / Capitalization Rate.

In this case, the net operating income is $85,000, and the capitalization rate is 0.0825. Plugging these values into the formula gives:

Indicated Value = $85,000 / 0.0825.

Calculating this:

Indicated Value = $1,030,303.03.

When rounded to the nearest whole number, this results in an indicated value of approximately $1,030,300.

This calculation reflects the relationship between income and value in real estate, where the capitalization rate serves as a metric for estimating the return on investment based on net income. It enables property investors and consultants to assess the value of properties based on their income-generating potential.

This accurate calculation confirms why the indicated value of $1,030,300 is the correct answer.