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Answer: REIT 3
## Calculation Explanation **Step 1: Calculate FFO for each REIT** FFO = EBITDA - Depreciation & Amortization + Non-cash rent - **REIT 1**: FFO = 325.0 - 110.0 + 10.0 = 225.0 - **REIT 2**: FFO = 330.0 - 80.0 + 16.6 = 266.6 - **REIT 3**: FFO = 325.0 - 60.0 + 18.5 = 283.5 **Step 2: Compare Price-to-FFO Ratios** Since all REITs have the same share price and number of shares outstanding, the REIT with the highest FFO will have the lowest price-to-FFO ratio. - REIT 1 FFO: 225.0 - REIT 2 FFO: 266.6 - REIT 3 FFO: 283.5 **REIT 3 has the highest FFO (283.5), therefore it has the lowest price-to-FFO ratio.**
Author: LeetQuiz Editorial Team
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39 An analyst gathers the following information (in € millions) about three REITs with the same share price and number of shares outstanding:
| REIT 1 | REIT 2 | REIT 3 | |
|---|---|---|---|
| EBITDA | 325.0 | 330.0 | 325.0 |
| Depreciation & amortization | 110.0 | 80.0 | 60.0 |
| Non-cash rent | 10.0 | 16.6 | 18.5 |
Which REIT has the lowest price-to-FFO ratio?
A
REIT 1
B
REIT 2
C
REIT 3
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