Publicly Traded Real Estate Securities-DCF approach SS#13

CFA Level II Alternative Investments
#1

Hello all,

I am going through the Schweser material, and found something confusing in the DCF valuation example for valuing REITs in SS#13.

When calculating a terminal value, the Schweser material isn’t using (r-g) in the denominator. It’s using (Requity-Rriskfree). Is this something unique to REITs? I don’t understand why the terminal value calculation would be different between REITs and other equities. Thanks a lot for the help.

-ggunnr

#2

It’s a Schweser mistake. Has already been discussed