Rearrange P = C1/r into r = C1/P = $2/$40 = 5%. At a 5%interest rate you
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Rearrange P = C1/r into r = C1/P = $2/$40 = 5%. At a 5%interest rate you are indifferent. If the interest rate is above 5%, the immediate one-time payment is better, because future cash flows are less valuable. If the interest rate is below 5%, the perpetuity payment is better, because future cash flows are more valuable.
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