Component Capitalization

  • July 23, 1985
  • • Written by: Gene Dilmore

Spring/Summer 1985, Vol 10, No 1

Abstract: The author proposes that each of the seven components of an income stream reflects a separate category of risk and therefore should be capitalized separately if the components have varying importance to the investor. The example of an office building appraisal is used to illustrate both deterministic and probabilistic versions of this procedure.