7. (8 points, 4+4) Consider a REIT that holds high quality office buildings in some of the best locations in the US. The REIT is currently traded at a price of $64/share and there are 130 million shares outstanding. Using the information below answer the following questions: Expected next year total revenue: $750M Expected next year total expenses including interest and depreciation): $380M Expected next year depreciation: $90M Expected next year interest: $70M Total debt: $1.6B Current office CAP in the US: 4.5% to 6.0% depending on quality and location. a. What is your estimation for a fair market value for a share of the REIT described? Show your work! b. What is your estimation for a fair price to pay for a share of the REIT described, if you require a 7.5% rate of return on an unlevered basis and expect the REIT to increase NOI at an average rate of 2.5%? Should you buy shares of that REIT? Show your work! $ per share 64.00 130 750 million Million Current share price Number of shares outstanding Expected next year revenue Expected next year total expenses (including interest and depreciation) Expected next year depreciation Expected next year interest payment Total Debt $ $ $ 380 Million $ 90 70 1.6 Million Million Billion $ to Current range of CAP for office space in the US (depending on quality and location) Required unlevered rate of return Expectet Nol graowth rate 6.00% 4.50% 7.50% 2.50% a. Answer: Show your work: b. Answer: Show your work