Capitalization rate

CFA Level II Alternative Investments
#1

Hi,

May I please know what the following statement means:

The capitalization rate is the discount rate minus the growth rate, when income and value are growing at the same rate.

This statement seems like Latin to me, can anyone please explain this?

Thanks guys and god bless

#2

Discount = 9%

Growth = 5%

When the growth of the income of the company and the value of the company grows at the same time, then you can use models such as DDM.

Cap = Discount - Growth = 9 - 5 = 4%