income approach

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income approach

A method of valuing real property by determining the net operating income over the useful life of the property and then translating that number to the present value via a discount rate.The present-value concept depends on the assumption that $1 today is worth more than 10 cents a year for the next 10 years,because of the purchasing power of the $1 to buy other investments that will yield a return over the next 10 years, and because of the effects of inflation, which decreases the amount of goods or services $1 will buy over the years. In order to compensate for these considerations,one would say that the value of 10 cents a year for the next 10 years is worth less than $1 today.How much less is the art and science of discounting.

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