A commercial property generates $120,000 in annual rental income and has operating expenses of $30,000. What is the Net Operating Income (NOI)?

Option B: $120,000

Option B ($120,000) is incorrect because this represents the gross rental income before deducting any operating expenses. This figure does not account for the costs of operating the property, which must be subtracted to determine the net operating income. Using gross income instead of NOI would significantly overstate the property's actual profitability and lead to incorrect investment decisions.

Option C: $150,000

Option C ($150,000) is incorrect because this figure appears to add the operating expenses to the rental income rather than subtract them. This calculation ($120,000 + $30,000) is mathematically wrong and conceptually flawed, as operating expenses reduce rather than increase the net operating income. This would grossly overstate the property's financial performance.

Option D: $30,000

Option D ($30,000) is incorrect because this represents only the operating expenses, not the net operating income. This figure completely ignores the rental income generated by the property. NOI must reflect the income remaining after operating expenses are paid, not just the expenses themselves. This would drastically understate the property's income-generating capacity.