You own a minor-league baseball team and are considering two competing bids for food service in your stadium.

You could enter into a five-year contract with a national food vendor who will pay you $ 100,000 upfront and $ 35,000 each year for the next 5 years. The payment is guaranteed and there is no chance that the vendor will default on payments.

You could enter into a 10-year joint venture with a local food vendor, where you will receive 40% of the profits from food sales at the stadium, in return for an initial investment of $ 85,000. The profits from food sales are expected to be $ 85,000 a year for the next 10 years.

If the riskfree rate is 3.5 %, the unlevered beta of food service companies is 1.50 and the market risk premium is 5%, which option is the more attractive one? (You can assume that profits = cashflows, the firm has no debt and that there are no taxes) ( 4 points)