Two mutually exclusive investment opportunities

Reference no: EM13511579

Two mutually exclusive investment opportunities require an initial investment of $5 million. Investment A then generates $1.5 million per year in perpetuity, while Investment B pays $1 million in the first year, with cash flows increasing by 3% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent?

A. 3%
B. 6%
C. 9%
D. 10%

Reference no: EM13511579

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