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RST Ltd. is evaluating two investment opportunities, Investment R and Investment S, with the following parameters: Investment R: Cost of Capital - 8%, Initial Investment

RST Ltd. is evaluating two investment opportunities, Investment R and Investment S, with the following parameters:

  • Investment R: Cost of Capital - 8%, Initial Investment - $250,000, Cash Inflow Year 1 - $60,000, Cash Inflow Year 2 - $70,000, Cash Inflow Year 3 - $80,000
  • Investment S: Cost of Capital - 9%, Initial Investment - $300,000, Cash Inflow Year 1 - $70,000, Cash Inflow Year 2 - $80,000, Cash Inflow Year 3 - $90,000 Calculate the discounted payback period for Investment R and Investment S. Discuss the significance of the payback period in investment decision-making.

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