Payback period was the earliest

selection criterion. The

$$

$$

is a "break$-$even" calculation in the sense that if a project's cash flows come in at the expected rate, the project will break even. The equation is:

Number of

Payback $=$ years prior $to+\frac{\text{U}\text{n}\text{r}\text{e}\text{c}\text{o}\text{v}\text{e}\text{r}\text{e}\text{d}\text{c}\text{o}\text{e}\text{t}at\text{t}\text{h}\text{a}\text{r}\text{t}of\text{y}\text{e}\text{a}\text{r}}{\text{C}\text{a}\text{s}\text{h}\text{f}\text{l}\text{o}\text{w}\text{d}\text{u}\text{r}\text{i}\text{n}\text{g}\text{f}\text{o}\text{l}\text{l}\text{r}\text{e}\text{c}\text{o}\text{v}\text{e}\text{r}\text{y}\text{y}\text{o}\text{u}\text{r}}$

full recovery

The $$ a project's payback, the better the project is$.$ However, payback has $3$ main disadvantages: $(1)$ All dollars received in different years are given $$ weight. $(2)$ Cash flows beyond the payback year are ignored. $(3)$ The payback merely indicates when a project's investment will be recovered. There is no necessary relationship between a given payback and investor wealth maximization.

A variant of the regular payback is the discounted payback. Unlike regular payback, the discounted payback considers $|$ costs. However, the discounted payback still disregards cash flows $$ the payback year. In addition, there is no specific payback rule to justify project acceptance. Both methods provide information about $$ and risk. operating working capital requirements, and tax effects are all included in these cash flows. Both projects have $4-$year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is $8\%.$

$\backslash$table$[[,|||,|||,|||,|||,4],[$Project A$,-1,000,650,445,280,330],[$Project B$,-1,000,250,380,430,780]]$

What is Project A$\text{'}$s payback? Round your answer to four decimal places. Do not round your intermediate calculations,

$$ years

What is Project A$\text{'}$s discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.

$$ years

What is Project B$\text{'}$s payback? Round your answer to four decimal places. Do not round your intermediate calculations.

$$ years

What is Project B$\text{'}$s discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.

$$ years