11. The payback period The payback method helps firms establish and identify a maximum acceptable payback period that helps in capital budgeting decisions. There are two versions of the payback method: the conventional payback method and the discounted payback method Consider the following case: Cold Goose Metal Works Inc. is a small firm, and several of its managers are worried about how soon the firm will be able to recover its initial investment from Project Sigma's expected future cash flows. To answer this question, Cold Goose's CFO has asked that you compute the project's payback period using the following expected net cash flows and assuming that the cash flows are received evenly throughout each year. Complete the following table and compute the project's conventonal payback period. Round the payback period to the nearest two decimal places. Be sure to complete the entire table-even if the values exceed the point at which the cost of the project is recovered Year 0 Year 1 Year 2 Year 3 Expected cash flow Cumulative cash flow Conventional payback period $-6,000,000 $2,400,000 $5,100,000 $2,100,000 years The conventional payback period ignores the time value of money, and this concerns Cold Goose's CFO. He has now asked you to compute Sigma's discounted payback period, assuming the company has a 8% cost of capital