Consider the REIT valuation spreadsheet presented in class. For each of the following scenarios, and all other things equal, determine whether each scenario will increase, decrease or wont affect the probability that new investors will achieve their levered required rate of return.

a. The price of the REIT is lower.

b. A distribution is defined for NOI growth rate, where the average value remains the same, but the right tail of the distribution is longer than the left tail.

c. The projected 10-year treasury rate is higher.

d. The quality adjustment value is lower.

e. The risk premium is lower.

f. The current market cap is higher.

g. The required levered return is higher

Outputs: NOI Current "Debt free" private market value Current private market value of equity Current private market value per share "Debt free" value @ Req. return Value per share @ Req. return Terminal CAP $ $ $ $ $ 496.000 11,711,622 K 8,682,622 K 97.01 9,349,386 K 70.62 5.70% NOI Interest Investment/Disposition CF 0 $ $ (7,697,000) (7,697,000) $ $ $ Inputs: Current share price Revenue Expenses Depreciation Interest Current Market CAP Req. unlevered return Req. levered return NOI growth rate Risk premium Total debt Shares outstanding Projected 10-year treasury Quality adjustment Value of other assets Borrowing cost IRR 4.22% $ 86.00 S 893,000 K 751,000 K $ 257,000 K $ 97,000 K 4.50% 7.50% 10% 1.80% 4.50% $ 3,029,000 K 89,500 K 3.00% 0.00% $ 491,000 K 3.20% Outputs: NOI Current "Debt free" private market value Current private market value of equity Current private market value per share "Debt free" value @ Req. return Value per share @ Req. return Terminal CAP $ $ $ $ $ 496.000 11,711,622 K 8,682,622 K 97.01 9,349,386 K 70.62 5.70% NOI Interest Investment/Disposition CF 0 $ $ (7,697,000) (7,697,000) $ $ $ Inputs: Current share price Revenue Expenses Depreciation Interest Current Market CAP Req. unlevered return Req. levered return NOI growth rate Risk premium Total debt Shares outstanding Projected 10-year treasury Quality adjustment Value of other assets Borrowing cost IRR 4.22% $ 86.00 S 893,000 K 751,000 K $ 257,000 K $ 97,000 K 4.50% 7.50% 10% 1.80% 4.50% $ 3,029,000 K 89,500 K 3.00% 0.00% $ 491,000 K 3.20%