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Two mutually exclusive investment opportunities require an initial investment of $5 million. Investment A then generates $1.60 million per year in perpetuity, while investment B
Two mutually exclusive investment opportunities require an initial investment of $5 million. Investment A then generates $1.60 million per year in perpetuity, while investment B pays $1.50 million in the first year, with cash flows increasing by 5% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent? A. 40% B. 88% C. 20% D. 80%
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