The capitalization value of a $30,000 income stream to an investor seeking a 12.5 percent return is:
A) $120,000
B) $200,000
C) $240,000
D) $480,000

Question

Quizplus · Accepted Answer

To determine the capitalization value, we need to divide the income stream by the desired rate of return expressed as a decimal. 
$30,000 ÷ 0.125 = $240,000. Therefore, the capitalization value is $240,000.

The Capitalization Value of a $30,000 Income Stream to an Investor