The correct answer is C, $520,000.

First calculate net operating income:

$122,000 − $70,000 = $52,000 NOI

Then apply the direct-capitalization formula:

Value = NOI ÷ Capitalization Rate

$52,000 ÷ 0.10 = $520,000

Therefore C is correct.

The relationship is often remembered using the IRV formula:

Income = Rate × Value

Value = Income ÷ Rate

Rate = Income ÷ Value

The income used for direct capitalization is net operating income, not gross income. NOI generally reflects property operating revenues minus appropriate operating expenses before mortgage debt service, depreciation, and income taxes.

Capitalization rates reflect market perceptions of risk, return, financing conditions, property type, location, growth expectations, and investment alternatives.

The income approach is especially important for commercial and investment properties because buyers often evaluate such assets according to their capacity to generate income.

Study Guide Reference: Property Valuation and Appraisal — Income Capitalization Approach, NOI and Capitalization Rates.