Kartman Corporation is evaluating four different real estate investments Management plans to buy the properties today and sell them three years from today. The annual discount rate for these investments is 13%. The following table summarizes the initial cost and the sale price in three years for each property Cost Today Sale Price in Three Years Parkside Acres $460,000 $860,000 Real Property Estates 830,000 1,370,000 Lost Lake Properties 650,000 1,050,000 Overlook 180,000 400,000 Kartman has a total capital budget of $830,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.) CHE

Kartman Corporation is evaluating four different real estate investments Management plans to buy the properties today and sell them three years from today. The annual discount rate for these investments is 13%. The following table summarizes the initial cost and the sale price in three years for each property Cost Today Sale Price in Three Years Parkside Acres $460,000 $860,000 Real Property Estates 830,000 1,370,000 Lost Lake Properties 650,000 1,050,000 Overlook 180,000 400,000 Kartman has a total capital budget of $830,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.) CHE

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Kartman Corporation is evaluating four different real estate investments. Management plans to buy the properties today and sell them three years from today. The annual discount rate for these investments is 15%. The following table summarizes the initial cost and the sale price in three years for each property: Parkside Acres Real Property Estates Lost Lake Properties Overlook Cost Today $430,000 810,000 660,000 180,000 The profitability index for Parkside Acres is Sale Price in Three Years $850,000 1,410,000 1,100,000 360,000 Kartman has a total capital budget of $810,000 to invest in properties. Which properties should it choose? (Round to two decimal places.)
Estimate the value of the property using the income approach based on the following facts: Net operating income annually for next 3 years is $400000 At end of three years, property is sold with an existing cap rate of 10% and a commission of 4% on sale The discount cap rate is the same as the existing cap rate and the operating income is assumed to be received at year end

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