Two mutually exclusive investment opportunities require an initial investment of $7 million. Investment A then generates $2 million per year in perpetuity, while investment B pays $1 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?

Answer rating: 100% (QA)

The cost of capital is the minimum return that an investor requires on their investment to justify making it To determine the cost of capital we need ... View the full answer