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Cost of capital includes an inflation term and the risk free rate (but neither may be right over the investment term).

You can use NPV to evaluate different options. If NPV of one investment is $1 and another is negative $4 then it is clear what the better investment is (all other things being equal). Do this for all your investment options and you can rank where to put your money. Of course, if isn’t that easy since two investments might have different terms, risk profiles, or different capital requirements.




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