Question

1. Per Block, Green Street Advisors uses a “valuation” method called “warranted share value”.  This Approach relies on which valuation method as part of the process:
   1. DCF
   2. Gordon Growth Model
   3. NAV
   4. All of the Above
2. Are AFFO numbers commonly found in the published financial statements of publicly traded REITs?
   1. Yes
   2. No
3. The benefit of the discounted cash flow method in valuing a REIT is that an analyst or investor can derive this type of fair price:
   1. A relative number to be used in comparison to other REITs
   2. An intrinsic number unique to that Company
   3. Both of the above are correct
   4. None of the above
4. The author talks about applying a blended Cap Rate Approach when conducting a DCF for REIT valuation purposes, how does that rate need to be adjusted to reflect the REIT’s indebtedness or greater use of leverage?
   1. The rate needs to be adjusted higher
   2. The rate needs to be adjusted lower
   3. No adjustment needed
   4. The question makes no sense since a Cap Rate should not be adjusted
5. A benefit of the Dividend Growth Model is ________.
   1. It recognized all Cash Flows
   2. It recognizes all Income
   3. It recognizes only cash flow expected to be received in the form of real money—dividend payments
   4. It recognizes EBITDA and thus, is a better comparison between “normal companies”

Answer 1

1. Answer D - All of the above.

Warranted share value method includes calculation of intrisic value (NAV), Time value of money (DCF) and Rate of interest/dividend calculation (Gordon growth model).  

2. A. Yes.

Since year 2003 AFFO numbers are commonly published in statements of publicly traded REITs.

3. B. Intrinsic numbers unique to the company.

As this mthod is independent and each company choose rate based on their own senario, it is unique and not comparable.

4. B. The rate needs to be adjusted lower.

5. C. It recognizes only cash flow expected to be received in the form of real money—dividend payments