$$\begin{array} { l r }
\text { Net revenue } & \$ 20,000,000 \
\text { Less: } & \
\text { Operating expenses } & 9,800,000 \
\text { Depreciation and } & \
\text { amartization } & \underline{4,400,000} \
\text { Incame fram aperations } & 5,800,000 \
\text { Less: } & \
\text { Interest expense } & \underline{1,280,000}\
\text { Net incame } &\$ \underline{4,520,000}\
\end{array}$$
-Consider the financial statements for a REIT, given above. Price multiples for comparable REITs are about 10 times current funds from operation FFO). What price does this suggest for the REIT's shares if 1,000,000 shares are issued?

Question

$$\begin{array} { l r } 
\text { Net revenue } & \$ 20,000,000 \
\text { Less: } & \
\text { Operating expenses } & 9,800,000 \
\text { Depreciation and } & \
\text { amartization } & \underline{4,400,000} \
\text { Incame fram aperations } & 5,800,000 \
\text { Less: } &  \
\text { Interest expense } &  \underline{1,280,000}\
\text { Net incame } &\$ \underline{4,520,000}\
\end{array}$$
-Consider the financial statements for a REIT, given above. Price multiples for comparable REITs are about 10 times current funds from operation FFO). What price does this suggest for the REIT's shares if 1,000,000 shares are issued?

Quizplus · Accepted Answer

Funds from operations (FFO) is calculated by adding depreciation and amortization back to net income. FFO = $4,520,000 + $4,400,000 = $8,920,000. The price per share is FFO per share times the multiple: ($8,920,000 / 1,000,000 shares) * 10 = $89.20 per share.

-Consider the Financial Statements for a REIT, Given Above