Can someone help me to understand real estate DCF valuation specifics?
How exactly is the WACC calculated for a real estate DCF model? Does the tax shield diminish the cost of dept like in the classical WACC calculation? Maybe a silly question, but does WACC calculation interfere with the cap rate somehow-could I just use the cap rate instead of WACC?. Is NOI used as Free Cash Flow to the Firm? Why is the terminal value calculated by dividing the cash flow sum by cap rate and not WACC?
Also a couple of questions to cap rates: Why is cap rate considered the inverse of a PE multiple-I would say it corresponds more to an EBIT multiple, no? Does it make sense to calculate cap rates by taking publicly traded companies' multiples (e.g hotel chain ratios)?
Private Equity Interview Course
- 2,447 questions across 203 private equity funds. Crowdsourced from over 500,000 mem.
- 9 Detailed LBO Modeling Tests and 15+ hours of video solutions.
- Trusted by over 1,000 aspiring private equity professionals just like you.