An apartment building develops a net income of $15,000. If it were sold at a price based upon a capitalization rate of 8%, the selling price would be:

To determine the selling price of an apartment building based on its net income and a capitalization rate, the formula used is:

Selling Price = Net Income / Capitalization Rate

In this scenario, the net income is $15,000, and the capitalization rate is 8%, which can be expressed as a decimal (0.08). Plugging these values into the formula gives:

Selling Price = $15,000 / 0.08 Selling Price = $187,500

This calculation shows that if the apartment building generates a net income of $15,000 and is sold at a capitalization rate of 8%, the selling price would indeed be $187,500. This formula underscores the relationship between net income, capitalization rates, and property value in real estate assessments.