1) An investor has the opportunity to invest in four new retail stores. The amount that can be invested in each store, along with the expected cash ?ow at the end of the ?rst year, the growth rate of the concern, and the cost of capital is shown for each case. It is assumed each investment will operate in perpetuity after the initial investment. Which investment should the investor choose? A) Initial investment: $100,000; Cash flow in year 1: $12,000; Growth Rate: 1.25%; Cost of Capital: 9.0% B) Initial investment: $90,000; Cash ?ow in year 1: $10,000; Growth Rate: 1.50%; Cost of Capital: 9.0% C) Initial investment: $80,000; Cash flow in year 1: $8000; Growth Rate: 1.75%; Cost of Capital:8.0% D) Initial investment: $60,000; Cash ?ow in year 1: $6000; Growth Rate: 2.50%; Cost of Capital: 7.5%
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