13. The Payback Period

will be able to recover its initial investment from Projedt Alpha's expected future cash flows. To answer this questiorn alue Hamster's OFo has asked that you compute the project's payback period using the following expected net cash year Complete the following table and compute the project's conventional payback period. For full credit, complete the entire table. Year o Year 1 Year 2 Year 3 -5,000,000 $,000,000 $4,250,000 $1,750,000 Expected cash flow Cumulative cash flow [-$5,000,000 3,000,000 ] $1,250,000 Conventional payback period: 1.70 years The conventional payback period ignores the time value of money, and this concems Blue Hamster's CFO. He has now as-you to compute Alpha's discounted payback period, assuming the company has a 3% cost of capital Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to the nearest two decimal places. For full credit, complete the entire table. Year o Year 1 Year 2 Year 3 Cash flow Discounted cash flow Cumulative discounted cash flow 5,000,000 $2,000,000 $4,250,000 $1,750,000 Discounted payback period: Which version of a project's payback period should the cro use when evaluating Project Alpha, given its theoretical superiority