A company has identified the following investments as looking promising. Each requires an initial investment of $1.2 million. Which is the best investment?

A.a perpetuity that generates a cash flow at the end of year 1 of $100,000, has a growth rate of 1.25%, and a cost of capital of

10.9%

B.a perpetuity that generates a cash flow at the end of year 1 of $800,000, has a growth rate of 2.25%, and a cost of capital of

11.2%

C.an investment that generates a cash flow of $400,000 at the end of each of the next five years, when the cost of capital is

6.8%

D.an investment that generates a cash flow of $200,000 at the end of each of the next ten years, when the cost of capital is

6.8%

Click to select your answer.