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Points out of 1.00 P Flag question Kelly Slater owns a parcel of land in Palm Springs and is considering two possible development options which

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Points out of 1.00 P Flag question Kelly Slater owns a parcel of land in Palm Springs and is considering two possible development options which both use his signature Kelly Slater Wave Pool technology. Option A: Create a private surf club, in which case he would have to invest $10 million today (EOY O). The club would then generate an annual free cash flow of $2 million in perpetuity starting EOY 1. Option B: Create a surf resort and hotel open to the public, in which case he would have to invest $50 million today (EOY 0). The resort would then generate an annual free cash flow of $6.5 million in perpetuity starting EOY 1. Assume Kelly's discount rate is 10% and that he can only invest in one of the two options. Kelly should: Select one: a. Accept both options because they both have positive NPV b. Choose Option A because it has a higher IRR c. Reject both options because both have an IRR less than 10% d. Choose Option B because it has a higher NPV

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