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(Answered) Kaimalino Properties (KP) IRR NPV capital limits


Kaimalino Properties (KP) is evaluating six real estate investments. Management plans to buy;the properties today and sell them five years from today. The following table summarizes the;initial cost and the expected sale price for each property, as well as the appropriate discount rate;based on the risk of each venture.;Project Discount Rate Cost Today Expected Sale Price in Year 5;Green Hills 8% $3,000,000 $10,000,000;Ocean Park Estates 15% $15,000,000 $75,500,000;West Ranch 8% $9,000,000 $46,500,000;Lakeview 15% $9,000,000 $50,000,000;Seabreeze 8% $6,000,000 $35,500,000;Mountain Ridge 15% $3,000,000 $18,000,000;KP has a total capital budget of $18,000,000 to invest in properties.;a. What is the IRR of each investment?;b. What is the NPV of each investment?;c. Given its budget of $18,000,000, which properties should KP choose?;d. Explain why the profitably index method could not be used if KP's budget were $12,000,000;instead. Which properties should KP choose in this case?
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Kaimalino Properties (KP) IRR NPV capital limits

 


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