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Karen and Paul are partners in a business. They have approached each other regarding possible investments to aid their business in creating more revenue. Karen's
Karen and Paul are partners in a business. They have approached each other regarding possible investments to aid their business in creating more revenue. Karen's investment would require an initial outlay of cash of $39,000 but would provide an additional revenue stream of $22,000 per year. Paul's investment would cost $64,000 and would bring in additional revenue of $33,000 per year. Both investments would provide revenue for four years. Using a discount rate of 10%, calculate the discounted payback period for each investment and determine which investment would better use the company's resources. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round intermediate calculations to the nearest whole dollar and final answers to 2 decimal places, e.g. 25.22. Ignore taxes.) Click here to view Present Value of 1 (Present Value of a Single Sum) Payback period Karen's investment Karen years Paul would be a better use of the company's resources. years
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