CheggQuestion

The conventional payback period ignores the time value of money, and this concerns Blue Hamster's CFO. He has now asked to compute Alpha's discounted payback period,assuming the company has a 9% cost of capital. complete the table.

Year 0 Year 1 Year 2 Year 3

Cash flow -5000000 2,000,000 4,250,000 1,750,000

Discounted cash flow ? ? ? ?

Cumulated discounted cash flow ? ? ? ?

Discounted payback period ?

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