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1) You have been offered an investment opportunity. You can give an entrepreneur $40,000 today and receive 20% of the firms cash flows in the
1) You have been offered an investment opportunity. You can give an entrepreneur $40,000 today and receive 20% of the firms cash flows in the future. The entrepreneur promises the firm will generate a total cash flow of $100,000 two years from now. No other cash flows will be generated. Alternatively, you can invest your money in the bank at 7% interest. Which should you choose?
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