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: Cost Today Sale Price in Three Years Parkside Acres $450,000 $910,000 Real Property Estates 840,000 1,380,000 Lost Lake Properties 620,000 1,040,000 Overlook 170,000 350,000 Kartman has a total capital budget of $840,000 to invest in properties. Which properties should it choose?
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: Cost Today Sale Price in Three Years Parkside Acres $450,000 $910,000 Real Property Estates 840,000 1,380,000 Lost Lake Properties 620,000 1,040,000 Overlook 170,000 350,000 Kartman has a total capital budget of $840,000 to invest in properties. Which properties should it choose?
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
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Transcribed Image Text: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:
Cost Today
Sale Price in Three Years
Parkside Acres
$450,000
$910,000
Real Property Estates
840,000
1,380,000
Lost Lake Properties
620,000
1,040,000
Overlook
170,000
350,000
Kartman has a total capital budget of $840,000 to invest in properties. Which properties should it choose?
The profitability index for Parkside Acres is (Round to two decimal places.)
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