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Frankie Flips buys investment properties to remodel and resell at a profit. Frankie needs to choose between the following three projects. 1. Calculate the IRR
Frankie Flips buys investment properties to remodel and resell at a profit. Frankie needs to choose between the following three projects.
1. Calculate the IRR of each project and evaluate which projects are acceptable.
2. Describe what the IRR formula measures and how the IRR technique is used make financial decisions.
3. Make a recommendation to which project Frankie should invest and why.
| Frankie's Flips Investment Opportunities (Properties A, B, & C) | |||
| Property A | Property B | Property C | |
| Purchase Price | $110,000 | $83,000 | $200,000 |
| Estimated Selling Price | $120,000 | $92,000 | $225,000 |
| Time (t) | 1 year | 1 year | 1 year |
| Hurdle Rate (r) | .10 | .10 | .10 |
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