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General equivalency between the discount rate and the going-in&going-out capitalization rates

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  • Gaetano Lisi

Abstract

Basically, this note extends the very useful works by Etter (1994) and Sevelka (2004) about the equivalence between discount rate and capitalization rate. The extension concerns two main points. First, it frames this relation within a clear and simple theoretical framework, that starts from the net present value and goes on to the direct capitalization, passing through the yield capitalization. Second, it also provides an equivalence relation between discount rate and going-in & going-out capitalization rates.

Suggested Citation

  • Gaetano Lisi, 2016. "General equivalency between the discount rate and the going-in&going-out capitalization rates," Economics and Business Letters, Oviedo University Press, vol. 5(2), pages 58-64.
    • Handle: RePEc:ove:journl:aid:11095
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/11095
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    1. Tsong-Yue Lai & Kerry Vandell & Ko Wang & Gerd Welke, 2008. "Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods," Journal of Real Estate Research, American Real Estate Society, vol. 30(4), pages 441-460.
    2. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40.
    3. Phillips, Robyn S., 1988. "Residential capitalization rates: Explaining intermetropolitan variation, 1974-1979," Journal of Urban Economics, Elsevier, vol. 23(3), pages 278-290, May.
    4. Ko Wang & Terry V. Grissom & Su Han Chan, 1990. "The Functional Relationships and Use of Going-In and Going-Out Capitalization Rates," Journal of Real Estate Research, American Real Estate Society, vol. 5(2), pages 231-246.
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