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 Parkside Acres Real Property Estates Lost Lake Properties Overlook $650,000 800,000 650,000 150,000 Kartman has a total capital budget of $800,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.) Sale Price in Year 3 $1,150,000 1,400,000 1,050,000 350,000

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 Parkside Acres Real Property Estates Lost Lake Properties Overlook $650,000 800,000 650,000 150,000 Kartman has a total capital budget of $800,000 to invest in properties. Which properties should it choose? The profitability index for Parkside Acres is (Round to two decimal places.) Sale Price in Year 3 $1,150,000 1,400,000 1,050,000 350,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 19P

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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 12%. The following table summarizes the initial cost and the sale price in three years for each property: Cost Today Sale Price in Year 3 $520,000 $1,020,000 Parkside Acres 870,000 1,470,000 Real Property Estates Lost Lake Properties 910,000 510,000 220,000 Overlook 20,000 Kartman has a total capital budget of $540,000 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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