Question
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
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
10%. The following table summarizes the initial cost and the sale price in three years for each property:
|
| Cost Today | Sale Price in Year 3 | ||
| Parkside Acres | $560,000 |
| $1,060,000 |
|
| Real Property Estates | 970,000 |
| 1,570,000 |
|
| Lost Lake Properties | 550,000 |
| 950,000 |
|
| Overlook | 60,000 |
|
260,000 |
|
Kartman has a total capital budget of
$620,000 to invest in properties. Which properties should it choose?
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