The table presents data comparing the "Cost Today" and the "Sale Price in Year 3" for four different properties. ### Property Investment Data#### Columns- **Cost Today**: Represents the current purchase price of each property.- **Sale Price in Year 3**: Indicates the projected sale price three years from now.#### Properties1. **Parkside Acres** - Cost Today: $550,000 - Sale Price in Year 3: $1,050,0002. **Real Property Estates** - Cost Today: $870,000 - Sale Price in Year 3: $1,470,0003. **Lost Lake Properties** - Cost Today: $540,000 - Sale Price in Year 3: $940,0004. **Overlook** - Cost Today: $50,000 - Sale Price in Year 3: $250,000This table can be used for examining potential investment growth over a period of three years. 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 11%. The following table summarizes the initial cost and the sale price in three years for each property:**Property Investment Table:**- **Property:** Parkside Acres- **Initial Cost:** $250,000- **Sale Price (in three years):** $340,000- **Property:** Sunset Villas- **Initial Cost:** $200,000- **Sale Price (in three years):** $270,000- **Property:** Meadow Estates- **Initial Cost:** $150,000- **Sale Price (in three years):** $200,000- **Property:** City Heights- **Initial Cost:** $300,000- **Sale Price (in three years):** $400,000Kartman has a total capital budget of $600,000 to invest in properties. Which properties should it choose?The profitability index for Parkside Acres is □. (Round to two decimal places.)

Annual discount rate = 11% Profitability index is present value of benefits to initial cost.

Answered: Kartman Corporation is evaluating four…

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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