5. Best Properties (BP) is evaluating six real estate investments. Management plans to buy the properties today and sell them five years from today. (Each investment is expected to generate a single future cash flow, the sale price at t = 5.) 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. Project Cost Today Discount Rate Expected Sale Price in Year 5 Mountain Ridge $ 3,000,000 15% $18,000,000 Ocean Park Estates 15,000,000 15% 75,500,000 Lakevierw 9,000,000 15% 50,000,000 Soabreozo 6,000,000 8% 35,500,000 Green Hills 3,000,000 10,000,000 West Ranch 9,000,000 46,500,000 8% 8% BP 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. Which properties should BP choose based on the Profitability Index rule? d. Does the Profitability Index rule give the correct decision in this case? For parts e and f, assume instead that BP has a total capital budget of $12,000,000 to invest in properties. e. Explain why the profitability index method can't be used in this case. f. (Optional) Which properties should BP choose in this case? (Hint: Since you can't use the Profitability Index rule in this case, you have to use the NPV rule. To apply the NPV rule: try out all possible combinations of projects and select the feasible combinations, ie those that meet the budget constraint. Then take the one combination that maximizes the overall NPV.)