What is the irr of each investment

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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?

Reference no: EM13910093

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