neptunhiker
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- Jun 18, 2026
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Hi,
my question is on Example 15 on page 34 in Reading 39 of the CFAI material. It is about the valuation of a property that has a NOI of 100,000 which is expected to increase at 2% (g) per year. The discount rate is 12% (r).
The solution is:
NOI / (r-g) = 100,000 / (0.12-0.02) = 1,000,000
Shouldn’t we also take account of the growth rate in the nominator just like in the Gordon Growth model? That is:
NOI * (1+g) / (r-g) = 100,000 * (1.02) / (0.12-0.02) = 1,020,000
Thanks.
my question is on Example 15 on page 34 in Reading 39 of the CFAI material. It is about the valuation of a property that has a NOI of 100,000 which is expected to increase at 2% (g) per year. The discount rate is 12% (r).
The solution is:
NOI / (r-g) = 100,000 / (0.12-0.02) = 1,000,000
Shouldn’t we also take account of the growth rate in the nominator just like in the Gordon Growth model? That is:
NOI * (1+g) / (r-g) = 100,000 * (1.02) / (0.12-0.02) = 1,020,000
Thanks.