1. A REIT has an NOI of $17 per share and currently pays a dividend of $12 per share. The dividend is projected to increase by 5 percent by next year and continue to increase by 5 percent per year thereafter. Assuming that the blended cap rate is 8.5 percent and the required rate of return is 10.0 percent, what would the net asset value (NAV) of the REIT be if it has debt=$50 per share, with average interest rate=6.5%?

$141.18

$150.00

$155.45

$160.00

2.

Why might it be argued that corporations do not have a comparative advantage when investing in real estate as a means of diversification from the core business?

Corporations cannot react as quickly as individual investors to changes in market conditions

Corporations often use property managers who do not understand financial markets

Diversification dilutes a corporations risk-return profile and does not provide an advantage to corporations

Corporations do not typically hold real estate in a large number of geographic areas and may not hold a variety of different types of properties