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Which is the better investment assuming a cost of capital

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Reference no: EM132929144

Problem 1: Two mutually exclusive investment opportunities require an initial investment of $7 million. Investment A pays $2.0 million per year in perpetuity, while investment B pays $1.4 million in the first year, with cash flows increasing by 4% per year after that. Assuming a cost of capital of 13%, which is the better investment?

A. Investment A
B. Investment B
C. They are equal

Reference no: EM132929144

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