Earnings Before Interest, Tax, Depreciation, and Amortization Formula
Colonial Apartments REIT reports the following financial information on a per-share basis:
GAAP Net Income [Earnings per Share (EPS)]=$4.00
GAAP Depreciation and Amortization =$3.00
Reserves for property capital expenditures=$0.80
Dividend paid= $4.50
Debt=$50, with an average interest rate on debt=7%
AFFO yield of 6.9% based on current share price
Keep in mind that AFFO/Share Price=Yield
Estimated weighted average firm-level private property market cap rate of 8%
Determine Colonial’s EBITDA
Determine the current (public) price of a share of Colonial REIT common stock
Determine the current share price premium (or discount) to NAV for the REIT
Colonial Apartments REIT reports the following financial information on a per-share basis:
GAAP Net Income [Earnings per Share (EPS)]=$4.00
GAAP Depreciation and Amortization =$3.00
Reserves for property capital expenditures=$0.80
Dividend paid= $4.50
Debt=$50, with an average interest rate on debt=7%
AFFO yield of 6.9% based on current share price
Keep in mind that =Yield
Estimated weighted average firm-level private property market cap rate of 8%
1. Determine Colonial’s EBITDA
2. Determine the current (public) price of a share of Colonial REIT common stock
3. Determine the current share price premium (or discount) to NAV for the REIT
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EBITDA represents the earnings before interests, taxes payable, depreciation and possible amortization. It is applied in the determination of the overall financial performance of a company and it is used as an alternative to other measures of simple earnings and net profits (Beracha, et.al, 420). The formula is the summation of Net incomes, Depreciation, interests and taxes where possible. The summary is as below.
Question (a)
The Earnings Before Interest, Tax, Depreciation and Armotization (EBITDA) is given by the formula below:
EBITDA = Net incomes + Interests + Depreciation + Amortization + Taxes (if any)
In this case no taxes. Interest is 7% of the $50 debt = $3.5. Depreciation + Amortization = $3.00 while net incomes amount to $4.00.
Therefore, EBITDA = $4.0 + $3.0 + $3.5
= $10.5
Question (b)
Calculation of current (public) share price for REIT common stock
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