Kimble Real Estate Investment Company purchases new apartment complexes, establishes a stable group of residents and then sells the complexes to apartment management companies. The average holding time is 3 years. Kimble REIC is currently investigating 2 alternatives: 1) The purchase of Harding Properties for $4,500,000. The complex is expected to produce net cash inflows of $360,000, $502,500 and $865,000 for the first, second and third years of operation, respectively. The market value of the complex at the end of the third year is expected to be $5,175,000. 2) The purchase of Summit Apartments for $3,450,000. The complex is expected to produce net cash inflows of $290,000, $435,000 and $600,000 for the first, second and third years of operation, respectively. The market value of the complex at the end of the third year is expected to be $4,050,000. Kimble has a desired rate of return of 12%. Required: 1. Calculate the net present value and the present value Index for Harding Properties 2. Calculate the net present value and the present value index for Summit Properties 3. Select the best investment property 4. Now assume that Kimble has $4,500,000 to invest and that any funds not invested in the real estate property chosen must be invested in a certificate of deposit earning 5% per. Would this information alter the decision made in #3? 5. Assume (not related to #4) that there is a 10% chance that the Kimble project will be annexed by the city of Denver, which has an outstanding school district. The annexation would likely increase net cash flows by $37,500 per year and would increase the market value at the end of year 3 by $300,000. Would this information change the decision reached in #3 (above)? This is a thought question. If you were presenting your decision in #3 above, how might (or would) you incorporate this additional possible scenario (even though it is only a 10% chance?)