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Two mutually exclusive investment opportunities require an initial investment of $7 million. Investment A then generates $2.00 million per year in perpetuity, while investment B
Two mutually exclusive investment opportunities require an initial investment of $7 million. Investment A then generates $2.00 million per year in perpetuity, while investment B pays $1.50 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. 13% B. 6% C. 3% OD. 12%
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