6. The payback period The payback method heips firms estabilsh and identify a maximum acceptable payback period that helps in their capitai budgeting decisions. Consider the case of Green Caterpiliar Garden Supplies Inc: Green Caterpillar Garden Supplies 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 Beta's expected future cash flows. To answer this question, Green Caterpillar'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 recelved evenly throughout each year. Complete the following table and compute the project's conventional payback period. For full credit, complete the entire table. (Note: Round the conventional 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 ionores the time value of money, and this concerns Green Caterpiltar's cro. He has now asked you to compute Betas discounted payback period, assuming the company has a 10% 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 two decimal places, for fun credit, complete the entire tabie. (Note: If your answer is negative, be sure to use a minus sign in your answen) Basics of Capital Budgeting The canventional payback period ignores the time value of money, and this concems Green Caterpillar's Cro. He has now asked you to campute Beta's discounted payback period, assuming the company has a 10% 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 paybuck period to two decimal places. For full crecit, camplete. the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Which version of a project's paryack period should the cro use when evaluating Froject Beta, given its theoretical superioniy? The dscounted payback penod The regular payback period One theoretical disadvantage of both paybock methods-compared to the net preient valoe method-is that they fait to consider the value of the cash flows beyond the point in time equal to the parback period. How much walue in this exarpple does the discounted parbock perlos method far to recognise due to this theoretical deficlercy? $1,051,541 $1.316.203 $2,506,386 $3,661,758