Two mutually exclusive investment opportunities require an initial investment of $8 million.Investment A then generates $1 million per year in perpetuity,while investment B pays $500,000 in the first year,with cash flows increasing by 5% per year after that.Determine the NPV for which an investor would regard both opportunities as being equivalent.
A)-$1 million
B)$0
C)$1 million
D)$2 million
E)$8 million

Question

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The Answer of Two mutually exclusive investment opportunities require an initial investment of $8 million.Investment A then generates $1 million per year in perpetuity,while investment B pays $500,000 in the first year,with cash flows increasing by 5% per year after that.Determine the NPV for which an investor would regard both opportunities as being equivalent.
A)-$1 million
B)$0
C)$1 million
D)$2 million
E)$8 million

Two Mutually Exclusive Investment Opportunities Require an Initial Investment of $8