A company has identified the following investments as looking promising. Each requires an initial investment of $1.2 million. Which is the best investment?
a.) a perpetuity that generates a cash flow at the end of year 1 of $100,000, has a growth rate of 1.25%, and a cost of capital of 10%.
b.) a perpetuity that generates a cash flow at the end of year 1 of $800,000 has a growth rate of 2.25% and a cost of capital of 12%.
c.) an investment that generates a cash flow of $400,000 at the end of each of the next five years, when the cost of capital is 6%.
d.) an investment that generates a cash flow of $200,000 at the end of each of the next ten years, when the cost of capital is 6%.