Question Capitalization Rate for Property hotel, expected, provides, question

cv4cfa

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 :-(

Rasec

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

firat

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