12. The NPV and payback period

Suppose you are evaluating a project with the cash inflows shown in the following table. Your boss has asked you to calculate the projects net present value (NPV). You dont know the projects initial cost, but you do know the projects regular, or conventional, payback period is 2.50 years.

The project's annual cash flows are:

Year	Cash Flow
Year 1	$325,000
Year 2	450,000
Year 3	400,000
Year 4	400,000

If the projects desired rate of return is 8.00%, the projects NPVrounded to the nearest whole dollaris .

Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply.

The payback period does not take into account the cash flows produced over a projects entire life.

The discounted payback period is calculated using net income instead of cash flows.

The discounted payback period does not take into effect the time value of money effects of a projects cash flows.