13. The payback period The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions. Convider the case of Cold Goose Metal Works Inc:t 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 Delta's expected future cash flows. To answer this question, Cold Goose's CFO has asked that you compute the project's paybsck period using the following expected net cash flows and assuming that the cash flows are received evenily throughout each year. Complete the following table and compute the project's conventional payback period. For full eredic, complete the entire table. (Note: Round the conventiond. payback period to two decimal places. If your answer is negative, be sure to use a minus sign in your answer.) The conventional payback period ignores the time value of money, and this concerns Cold Goose's CFO. He has now asked you to compute Delta's Giscounted payback period, assuming the company has a 7% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash fow values to the nearest whole dollar, and the discounted payback period to two decimal places. For full credit, complete the endire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Which version of a project's peyback period should the CFO ute when evaluating Project Deita, given its theoretical superiority? The regular prybeck perlod The olscounted parback period One theorescal disadvantage of both payback methods -compared to the net present value method-is that they fail to consider the value of the cash fows beronb the point in time equal to the pirback period. How much value in this example does the discounted payback period method fais to recognize due to this theoretical dendency? 13,957,217 56,165,764 51,714,226 \$2,411,755