A company has identified the following investments as looking promising. Each requires an initial investment of $1.2 million. Which is the best investment?
1) 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%
2) a perpetuity that generates a cash flow at the end of year 1 of $80,000, has a growth rate of 2.25%, and a cost of capital of 12%
3) 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%
4) 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%