You are considering two alternate investments-one perpetuity and other a stream of uneven cash flows
The perpetunity pays $25000 in perpetunity from year 6 onwards, while the uneven cash flow investment pays the following cash flows in years 2 to 7 Yr2: 80000, yr3 70000, yr4 60000, yr 5 50000, yr6 40000 and yr7 30000
Required if you can only buy one of the above investments at a rate of return of 6 % per unnum, which would you perfer? which would you prefer if you could achieve a rate of return of 8 % per annum? provide detailed workings