Gulf Properties (GP) is evaluating six real estate investments. Management plans to buy the properties today and sell th

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Gulf Properties (GP) 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.

Gulf Properties Gp Is Evaluating Six Real Estate Investments Management Plans To Buy The Properties Today And Sell Th 1 (32.67 KiB) Viewed 32 times

GP 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 GP choose?
Project Mountain Ridge Ocean Park Estates Lakeview Scabrecze Green Hills West Ranch Cost Today $ 3,000,000 15,000,000 9,000,000 6,000,000 3,000,000 9,000,000 Discount Rate Expected Sale Price in Year 5 15% $18,000,000 15% 75,500,000 15% 50,000,000 8% 35,500,000 10,000,000 8% 46,500,000 8%