Blue Hamster Manufacturing Inc. is a small firm, and several of its managers are worried about how soon the firm will able to recover its initial investment from Project Alpha's expected future cash flows. To answer this question, Blue Hamster'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 received evenly throughout each year.

Complete the following table and compute the project's conventional payback period. For full credit, complete the entire table.

	Year 0	Year 1	Year 2	Year 3
Expected Cash Flow	-4,000,000	$1,600,000	$3,400,000	$1,400,000
Cumulative Cash flow
Conventional payback period:

The conventional payback period ignores the time value of money, and this concerns Blue Hamster's CFO. He has now asked you to compute Alpha's discounted payback period, assuming the company has a 10% cost of capital. Complete the following table and perform any necessary calculation. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to the nearest two deciaml places.

	Year 0	Year 1	Year 2	Year 3
Cash Flow	-4,000,000	$1,600,000	$3,400,000	$1,400,000
Discounted cash flow
cumulative discounted cash flow
discounted payback period:

Which version of a project's payback period should the CFO use when evulating Project Alpha, given its theoretical superiority?

a. the discounted payback period

b. The regular payback period

How much value doesthe discounted payback period method fail to recognize due to this theoretical deficiency?

a. $1,316,303

b. $1,051,841

c. $2,506,386

d. $3,861,758