Chartered Financial Analyst Level 2
Get started today
Ultimate access to all questions.
Deep dive into the quiz with AI chat providers.
We prepare a focused prompt with your quiz and certificate details so each AI can offer a more tailored, in-depth explanation.
37 An analyst gathers the following information about a REIT for the year just ended:
- FFO:
$65,000 - Non-cash rent:
$5,000 - Recurring capital expenditures:
$10,000 - Weighted average number of common shares: 20,000
If the REIT's price-to-adjusted-FFO multiple is 12x, the forecast REIT share price is closest to:
Exam-Like
A
$30.
B
$36.
C
$48.
Explanation:
Calculation Steps
Step 1: Calculate Adjusted FFO (AFFO)
- FFO =
$65,000 - Subtract non-cash rent:
$65,000 -$5,000 =$60,000 - Subtract recurring capital expenditures:
$60,000 -$10,000 =$50,000 - AFFO =
$50,000
Step 2: Calculate AFFO per share
- AFFO per share =
$50,000 ÷ 20,000 shares =$2.50per share
Step 3: Calculate forecast share price
- Price-to-AFFO multiple = 12x
- Forecast share price = AFFO per share × Multiple =
$2.50× 12 =$30.00
However, let me verify this calculation:
Actually, let me recalculate:
- FFO =
$65,000 - Non-cash rent adjustment:
$5,000 (this should be added back, not subtracted) - Recurring capital expenditures:
$10,000 (this should be subtracted)
Correct calculation:
AFFO = FFO + Non-cash rent - Recurring capital expenditures
AFFO = $65,000 + $5,000 - $10,000 = $60,000
AFFO per share = $60,000 ÷ 20,000 shares = $3.00 per share
Forecast share price = $3.00 × 12 = $36.00
Therefore, the correct answer is $36 (Option B).
Comments
Loading comments...