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:

windy acres hillcrest

yearly aftertax cash flow probability yearly after tax cash flow probability

50000 0.2 55000 0.4

55000 0.2 60000 0.2

70000 0.2 70000 0.1

85000 0.2 80000 0.3

90000 0.2

Mr. Backster is likely to hold the apartment complex of his choice for about 35 years and will use this period for decision-making purposes. Either apartment can be purchased for $200,000. 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 Discount Rate

0-0.35 8%

0.35-0.40 12(cost of capital)

0.40-0.50 16

Over 0.50 not considered

a.Compute the risk-adjusted net present value for Windy Acresand Hillcrest Apartments.(Round "PV Factor" to 3 decimal places. Enter the answers in thousands of dollars. Do not round intermediate calculations. Round the final answers to nearest whole dollar.)

Net present value

Windy Acres . .............................$

Hillcrest Apartments ...............................$