Investment opportunity 2. Bill is assessing an investment in one of two studio apartments in Sydney's Potts Point as rental properties for a 3-year time frame. Each property requires an initial outlay of $200,000 and would be sold at the end of 3 years. Bill expects that at this time he could sell property A for $300,000 and property B for $280,000. He also anticipates an increase in net rental income each year for each property, Property B is older but because of its excellent location he expects to achieve a higher net rental even though its expected sales price is likely to be a bit lower than property B. 1 if Bill did not want to invest in either of the two properties then he would invest the $200,000 in a managed fund of equivalent risk which is expected to pay a rate of return of 7% p.a. > The expected net income flows for both properties is shown below: Year 1 Year 2 Year 3 Property A $10,000 $10,250 $10,500 31 Page Property B $11,000 $11,500 $12,000 a. Calculate the present Value (PV) of each of the two properties to assist Bill with his decision b. Based on the PV analysis which property, if any, should Bill buy? c. Indicate the assumptions on which PV is based that may, in fact, even lead Bill to an investment decision that may be incorrect