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M . John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two
M John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows
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Mindy Acres
Hillcrest Apartments Aftertas
Yearly Aftertas Cash Inflow
Probability
Yearly Cash Inflow
Probability
Mr Backster is likely to hold the apartment complex of his choice for about years and will use this period for decisionmaking purposes. Either apartment can be purchased for $ Mr Backster uses a riskadjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation for other types of investments, he also considers other measures
Coefficient of
Variation
Discount Rate
cost of capital
Over
not considered
a Compute the riskadjusted net present value for Windy Acres and Hillcrest Apartments. Round PV Factor" to decimal places. Do not round intermediate calculations. Round the final answers to nearest whole dollar.
Kindy Acres
Net present value
Hillcrest Apartments
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