Kaimalino Properties (KP) is evaluating six real estate investments. Management plans to buy theproperties today and sell them five years from today. The following table summarizes the initial cost andthe expected sale price for each property, as well as the appropriate discount rate based on the risk ofeach venture.Expected SaleCost Today Discount Rate (%) Price in Year 5$18,000,000Project$3,000,000Mountain Ridge1575,500,00050,000,00035,500,00010,000,000Ocean Park Estates15,000,0009,000,0006,000,0003,000,00015Lakeview15Seabreeze8Green Hills8.West Ranch9,000,00046,500,000KP has a total capital budget of $18,000,000 to invest in properties.a. What is the IRR of each investment?b. What is the NPV of each investment?c. Given its budget of $18,000,000, which properties should KP choose?d. Explain why the profitability index method could not be used if KP's budget were $12,000,000 instead.Which properties should KP choose in this case?Fill in the IRR of each investment in the table above: (Round to two decimal places.)

Kaimalino Properties (KP) is evaluating six real estate investments. Management plans to buy the properties today and sell them five years from today. The following table summarizes the initial cost and the expected sale price for each property, as well as the appropriate discount rate based on the risk of each venture. Expected Sale Cost Today Discount Rate (%) Price in Year 5 $18,000,000 Project $3,000,000 Mountain Ridge 15 15,000,000 9,000,000 6,000,000 3,000,000 75,500,000 50,000,000 35,500,000 10,000,000 Ocean Park Estates 15 Lakeview 15 Seabreeze 8 Green Hills 8 West Ranch 9,000,000 8 46,500,000 KP has a total capital budget of $18,000,000 to invest in properties. a. What is the IRR of each investment? b. What is the NPV of each investment? c. Given its budget of $18,000,000, which properties should KP choose? d. Explain why the profitability index method could not be used if KP's budget were $12,000,000 instead Which properties should KP choose in this case? Fill in the IRR of each investment in the table above: (Round to two decimal places.)

Kaimalino Properties (KP) is evaluating six real estate investments. Management plans to buy the properties today and sell them five years from today. The following table summarizes the initial cost and the expected sale price for each property, as well as the appropriate discount rate based on the risk of each venture. Expected Sale Cost Today Discount Rate (%) Price in Year 5 $18,000,000 Project $3,000,000 Mountain Ridge 15 15,000,000 9,000,000 6,000,000 3,000,000 75,500,000 50,000,000 35,500,000 10,000,000 Ocean Park Estates 15 Lakeview 15 Seabreeze 8 Green Hills 8 West Ranch 9,000,000 8 46,500,000 KP has a total capital budget of $18,000,000 to invest in properties. a. What is the IRR of each investment? b. What is the NPV of each investment? c. Given its budget of $18,000,000, which properties should KP choose? d. Explain why the profitability index method could not be used if KP's budget were $12,000,000 instead Which properties should KP choose in this case? Fill in the IRR of each investment in the table above: (Round to two decimal places.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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