Which of the following is not one of the three approaches discussed in Chapter 11 to determine the appropriate discount rate or opportunity cost of capital in property valuation?
A) Historical evidence (such as the NCREIF Index total return history).
B) Survey evidence (based on what market participants and brokers say investors are looking for).
C) The average WACC in the REIT industry determined from REIT share price capital returns in the stock market combined with typical commercial mortgage interest rates. (This wasn't in Ch 11, and also you would need to use Total (not capital ) returns from REIT share prices.)
D) Empirical evidence of property cap rates plus typical rental growth minus depreciation, less typical capital expenditures as a fraction of property value.

Question

Quizplus · Accepted Answer

Option C is not mentioned as an approach to determine the appropriate discount rate or opportunity cost of capital in property valuation in the context provided. The explanation within the option itself clarifies that this method was not discussed in Chapter 11 and also points out a methodological error in using capital returns instead of total returns.

Which of the Following Is Not One of the Three