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Mr . John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two
Mr 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:
tabletableWindy AcresYearly AftertaxtableHillcrest ApartmentsYearly AftertaxCash Inflow,Probability,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
tabletableCoefficient ofVariationDiscount Rate
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