capitalization rate

Definitions (3)
Popular Terms
1. General: Discount (or interest) rate used to determine the present value of a series of future earnings from an investment.
2. Business valuation: Reciprocal of the desired rate of return multiplied by the normalized earnings of a business to arrive at its purchase price.
3. Real estate: Ratio of rental income from a property to its market value, expressed as a percentage. This rate is used in comparing rate of return from a property with the rate of return from alternative investments.

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