How can a discount be built into a capitalization/discount rate?

Consider the function of the rate on the value of the company. Also think about what rate represents, the rate of return an investor would seek.

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To be sure, do not confuse the discount (DLOM) associated with the cap rate. The additive build-up method (BUM) is based on premiums or discounts. Think of how the cap rate can be increased to include a built-in discount. The higher the rate, the lower the value, the function of a discount.