Kartman Corporation is evaluating four different real estate investments. Management plans to buy the properties today and sell them three years fromtoday. The annual discount rate for these investments is 15%. The following table summarizes the initial cost and the sale price in three years foreach property:Sale Price in Three YearsParkside AcresCost Today$470,000860,000$930,000Real Property Estates1,420,000Lost Lake Properties680,0001,080,000Overlook170,000350.000Kartman has a total capital budget of $860,000 to invest in properties. Which properties should it choose?The profitability index for Parkside Acres is(Round to two decimal places.)

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 $470,000 860,000 680,000 170,000 Sale Price in Three Years $930,000 1,420,000 1,080,000 350.000 Parkside Acres Real Property Estates Lost Lake Properties Overlook Kartman has a total capital budget of $860,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.)

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 $470,000 860,000 680,000 170,000 Sale Price in Three Years $930,000 1,420,000 1,080,000 350.000 Parkside Acres Real Property Estates Lost Lake Properties Overlook Kartman has a total capital budget of $860,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.)

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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RadCo is considering two projects. The first, project A. has $400,000 income after the first year which increases by 8% each year for a total of 5 years. Project B has $450,000 income after the first year which increases by $25,000 each year for a total of 5 years. RadCo can only choose one project. Based on present worth today, which project should RadCo choose? The interest rate is 6% annual compounded annually.
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The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Operating Net Cash Year Income Flow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The cash payback period for this investment a. 4 years Xb. 3 years c. 5 years d. 20 years
Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years. The salvage value of the ambulance will be $25,000. Assume the ambulance is sold at the end of year 5. Calculate the NPV of the ambulance if the required rate of return is 9%. (Round your answer to the nearest $1.) A) $(10,731) B) $10,731 C) $(5,517) D) $5,517
The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year 1 2 $18,750 18,750 18,750 18,750 18,750 The average rate of return for this investment 3 4 Operating Income 5 Net Cash Flow $93,750 93,750 93,750 93,750 93,750
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Grady Corporation is considering the purchase of a new piece of equipment. The equipment costs $51,100 and will have a salvage value of $5,120 after 9 years. Using the new piece of equipment will increase Grady's annual net cash flows by $6,090. Grady's cost of capital is 15%. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use appropriate factor from the PV tables. Required: a. What is the present value of the increase in annual cash flows? b. What is the present value of the salvage value? c. What is the net present value of the equipment purchase? d. Based on financial factors, should Grady purchase the equipment? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the present value of the increase in annual cash flows? Note: Round your answer to the nearest whole dollar. Present Value Required B >
Torbet Fish Packing Company wants to accumulate enough money over the next 12 years to pay for the expected replacement of its digitalized, automated scaling machine. The new machine is expected to cost $240,000 in 12 years. Torbet currently has $15,000 that it plans to invest over the next 12 years to help pay for the new machine. Torbet wants to put away an equal, end-of-year amount into a sinking fund investment account at the end of each of the next 12 years. Earnings on all of the investments are expected to be 8 percent for the first six years and 10 percent thereafter. What equal, end-of-year amount must Torbet save each year over the next 12 years to meet these needs? Use Table I and Table III or a financial calculator to answer the question. Round your answer to the nearest dollar.
On October 1, White Way Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could use the funds to invest in $180,000 of 6% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled: Cost of store equipment$180,000Life of store equipment16 yearsEstimated residual value of store equipment$15,000Yearly costs to operate the store, excluding depreciation of store equipment$58,000Yearly expected revenues—years 1–8$85,000Yearly expected revenues—years 9–16$73,000 Required:A. Prepare a differential analysis as of October 1 presenting the proposed operation of the store for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or…
Young Corporation is considering purchasing equipment that costs $50,000 and is expected to provide the following cash inflows over its five-year useful life: Year Cash Inflow $12,000 $16,000 $18,000 $ 4,000 $ 3,000 1 4 What is the payback period of this investment project? (Rounded to the nearest year.)

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