How is the basic formula for value expressed?

The correct expression of the basic formula for value is represented by the relationship between net operating income (NOI) and the capitalization rate (cap rate). This formula articulates that the value of an asset is determined by dividing its net operating income by the capitalization rate, which represents the expected return on investment. Essentially, this relationship helps determine how much an income-generating property is worth based on its ability to produce income.

In this formula, net operating income reflects the revenue the property generates after operating expenses have been deducted, while the cap rate serves as a metric to evaluate the risk and return associated with the property. A higher NOI indicates greater income generation capabilities, while a lower cap rate often suggests a more stable investment with less perceived risk. Thus, using the formula Value = Income / Rate establishes a clear, quantifiable link between the property's operational performance and its market value, which is fundamental in real estate valuation and investment analysis.