If a property has a net operating income of $120,000 and a desired rate of return of 12%, what is the value of the property?

To determine the value of the property based on its net operating income (NOI) and the desired rate of return, you can use the formula for capitalization rate (cap rate), which is:

Value = Net Operating Income / Capitalization Rate

In this case, the net operating income is $120,000, and the desired rate of return, which serves as the capitalization rate, is 12% (or 0.12 when expressed as a decimal). Therefore, the calculation would be:

Value = $120,000 / 0.12

When you perform this calculation, you get:

Value = $1,000,000

This value represents how much the property is worth based on the income it generates and the rate of return that investors desire. Thus, the correct answer is indeed $1,000,000, aligning with the principles of real estate valuation where higher income relative to the rate of return indicates a higher property value.