Two Mutually Exclusive Investment Opportunities Require an Initial Investment of $5

question 80

Multiple Choice

Two mutually exclusive investment opportunities require an initial investment of $5 million. Investment A then generates $1.5 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?

• A)3%
• B)9%
• C)6%
• D)10%

---

Definitions:

Seminal Fluid

A viscous fluid produced by male reproductive organs, containing spermatozoa and various compounds that support fertility and sperm viability.

Sperm Maturation

The process by which spermatozoa undergo physical and biochemical changes to gain motility and the ability to fertilize an egg.

Sertoli Cells

Supporting cells of the tubules of the testis.

Blood-Testis Barrier

A physical barrier formed by Sertoli cells in the walls of seminiferous tubules in the testes, crucial for protecting germ cells from harmful substances and autoimmune attacks.