I got a little confused with problems in Reading 44 (Publicly Traded Real Estate Securities) of the official level 2 curriculum.
In problem 4, REIT terminal value is being calculated as CF / (Cost of equity - risk free rate)
In problem 12, REIT terminal value is being calculated as CF / (Cost of equity - LT growth rate)
Why the discrepancy and how do I know which one to use if such a problem appears on the exam?
you’re using the cost of equity in both. you never use risk free rate to discount. check again.
The dividend growth is coincidentally the same for REIT C. Chill out.
CF / (Cost of equity - LT growth rate) is the way to go
Yeah I missed that LT growth rate was shown in the Exhibit…R(f) and LT growth rate are the same so I missed it out. It would not make sense to use the R(f) but after like 150 problems today, it happens 