Problem $13-21$

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:

Mr$.$ Backster is likely to hold the apartment complex of his choice for about $20$ years and will use this period for decision$-$making

purposes. Elther apartment can be purchased for $$140,000.$ Mr$.$ Backster uses a risk$-$adjusted 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

a$.$ Compute the risk$-$adjusted net present value for Windy Acres and Hillcrest Apartments. $($Round $"$PV Factor" to $3$ decimal places. Do

not round Intermedlate calculatlons. Round the final answers to nearest whole dollar.$)$

b$-1.$ Which investment should Mr$.$ Backster accept if the two Investments are mutually exclusive?

Windy Acres

Hillcrest

Both

None