Chartered Financial Analyst Level 2

Calculation of NAV per Share

Step 1: Calculate the value of real estate assets [ \text{Value of real estate} = \frac{\text{Net Operating Income}}{\text{Cap Rate}} = \frac{$346,000}{0.072} = $4,805,556 ]

Step 2: Calculate total assets [ \text{Total Assets} = \text{Value of real estate} + \text{Cash} + \text{Land held for development} + \text{Accounts receivable} ] [ \text{Total Assets} = $4,805,556 + $43,000 + $38,000 + $29,000 = $4,915,556 ]

Step 3: Calculate Net Asset Value (NAV) [ \text{NAV} = \text{Total Assets} - \text{Total Debt} = $4,915,556 - $1,440,000 = $3,475,556 ]

Step 4: Calculate NAV per share [ \text{NAV per share} = \frac{\text{NAV}}{\text{Shares outstanding}} = \frac{$3,475,556}{63,000} = $55.17 ]

Wait, this gives us $55.17 which matches option A. Let me double-check the calculation:

• Real estate value: $346,000 / 0.072 =$4,805,556 ✓
• Total assets: $4,805,556 +$43,000 + $38,000 +$29,000 = $4,915,556 ✓
• NAV: $4,915,556 -$1,440,000 = $3,475,556 ✓
• NAV per share: $3,475,556 / 63,000 =$55.17 ✓

However, I notice that the question asks for the NAV per share and the options include $55.17,$76.28, and $77.67. My calculation gives$55.17, but let me check if there's an alternative approach.

Alternative approach - using enterprise value: [ \text{Enterprise Value} = \frac{\text{NOI}}{\text{Cap Rate}} = $4,805,556 ] [ \text{Equity Value} = \text{Enterprise Value} - \text{Debt} + \text{Cash} = $4,805,556 - $1,440,000 + $43,000 = $3,408,556 ] [ \text{NAV per share} = \frac{$3,408,556}{63,000} = $54.10 ]

This still doesn't match the higher options. Let me reconsider the calculation:

Actually, for REIT NAV calculations, we should include all non-real estate assets: [ \text{Total Assets} = \text{Real Estate Value} + \text{Cash} + \text{Land} + \text{Accounts Receivable} ] [ = $4,805,556 + $43,000 + $38,000 + $29,000 = $4,915,556 ] [ \text{NAV} = $4,915,556 - $1,440,000 = $3,475,556 ] [ \text{NAV per share} = $3,475,556 / 63,000 = $55.17 ]

This confirms that $55.17 is the correct answer, which corresponds to Option A.