Compute the risk-adjusted net present values

Reference no: EM13294112

Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties.

Palmer Heights
Yearly aftertax
cash inflow
(in thousands) Probability
$ 20 .2
25 .2
40 .2
55 .2
60 .2

Crenshaw Village
Yearly aftertax
cash inflow
(in thousands) Probability
$ 25 .2
30 .3
40 .4
50 .1

Mr. Golff is likely to hold the complex of his choice for 20 years, and he will use this time period for decision-making purposes. Either apartment complex can be acquired for $140,000. Mr. Golff uses a risk-adjusted discount rate when considering investments. His scale is related to the coefficient of variation.

Coefficient of variation Discount rate
0 - 0.20 7 %
0.21 - 0.40 10 (cost of capital)
0.41 - 0.60 14
Over 0.60 20

(a) Compute the risk-adjusted net present values for Palmer Heights and Crenshaw Village. (Omit the "tiny_mce_markerquot; sign in your response.)

Net present value
Palmer Heights $
Crenshaw Village $

Reference no: EM13294112

Questions Cloud

Define what is the concentration of phosphate ions : A saturated solution of potassium phosphate was filtered and then titrated. The concentration of [K+] was found to be 0.00956 M. What is the concentration of phosphate ions in this saturated solution

Determine the theoretical amount of ammonia possible : How many grams of ammonia gas would be formed when 11.2 Liters of hydrogen gas at STP reacts with 4.72 Liters of nitrogen gas

Calculate the maximum charge the cloud can hold : Regarding the Earth and a cloud layer 800 m above the earth as the "plates" of a capacitor, calculate the capacitance. What is the maximum charge the cloud can hold

Generator is a wave-wound-calculate the terminal voltage : Generator is a wave-wound and has 792 conductors and the total resistance of the armature winding is 0.08 Ohm. Calculate the terminal voltage if the armature current is 50A

Compute the risk-adjusted net present values : Mr. Golff uses a risk-adjusted discount rate when considering investments. His scale is related to the coefficient of variation.

How to calculate the molar mass of a gas : Calculate the Molar mass of a gas if 2.20g occupies 0.885L at 690 torr and 36 degrees C

What speed should the captain tell the computer : A 70,000 kg spaceship wants to orbit a tiny black hole at a height of 10,000 m. What speed should the captain tell the computer to set the spaceship for

Public relations is valued for its strategic contributions : Public Relations is valued for its strategic contributions, one of which is developing problem solving strategies for the entire organization. Public Relations pays attention to issues as they emerge, monitoring them before they crystallize into pub..

Analyzing health care decision making : A number of quantitative methods are utilized to make decisions and recommendations in health care. Quantitative methods are used to analyze and predict the demand for patient services, to determine capital expenditures for facility and technol..

User Account

All Pages