AVUI 6. The payback period The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions Consider the case of Cold Goose Metal Works Inc 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 Beta's expected future cash flows. To answer this question, Cold Goose's CFO has asked that you compute the projects payback period using the following expected net cash flows and assurning that the cash flows are received evenly throughout each year, Complete the following table and compute the project's conventional payback period. For full credit complete the entire tableNote Round the conventional payback period to two decimal places. If your answer is negative, be sure to use a minus sign in our answer Year o Year 1 $1,800,000 Year 2 $3,825,000 Year 3 51.525.000 -$4.500.000 Expected cash flow Cumulative cash flow 5 Conventional payback period: Years The conventional payback period ignores the time value of money and this concerns Cold Goose CFO He has now asked you to compune Beta discounted payback period, assuming the company has a cost of capital complete the following table and perform any necessary calentations Round the discounted cash low value to the nearest whole dollar, and the discounted payback period to two decimal places For Full credit complete the entire table. (Note: If your answer negative, be sure to use a minus sign in your answer: Year 0 Year 3 -$4,500,000 Year 1 $1,800,000 Year 2 $3,825,000 $1,575,000 Cash flow Discounted cash flow Cumulative discounted cash flow Discounted payback period: 5 IS years Which version of a project's payback period should the CFO use when evaluating Project Beta, given its theoretical superiority? The regular payback period The discounted payback period One theoretical disadvantage of both payback methods-compared to the net present value method-is that they fall to consider the value of the cash flows beyond the point in time equal to the payback period. How much value in this example does the discounted payback period method fail to recognize due to this theoretical deficiency? $1,250,286 O $4,529,607 $1,696,274 O $2,916,953