You are deciding between two mutually exclusive investment opportunities. Both require the same initial investment of $9.8 million. Investment A will generate $2.01 million per year (starting at the end of the first year) in perpetuity. Investment B will generate $1.47 million at the end of the first year and its revenues will grow at 2.6% per year for every year after that. Hint: the present value of a growing perpetuity with growth rate g, discount rate k and first cash flow CF1 taking place at the end of the year 1 is PV=CF1/(k-g). Assume the cost of capital is 7.8%.

1. Obtain the payback period and discounted payback period. Interpret the results