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6. The payback period The payback method helpfums estan entity table payback period that he is the catalboden des Consider the came Green Caterpie Garden Suoples The Green Caterpar Garden Supplies the same tim, and several of es managers are womed about how the form will be le 1 recover investimento e aspected areashoot Com that you come the project back period peded cash flow and that the case received every throughout each you Complete the following and come the properly. For de complete with the Conventional payback med to be decat cewe Year 54.500.000 Year 310000 Year? 5.05.000 11,175.000 Extdoshow Cumulative how Conventional puyack period Yes The compare the videos Contact Alplu's discounted payback period, the com as a cost of all the power the compat pertate Year 1 Year 2 Year 3 Year o $4,500,000 $1,800,000 $3,825,000 $1,575,000 Expected cash flow Cumulative cash flow Conventional payback period: years The conventional payback period ignores the time value of money, and this concerns Green Caterpillar's CFO. He has now asked you to compute Alpha's discounted payback period, assuming the company has a 9% 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 full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Year o Year 2 Year 1 $1,800,000 5 Year 3 $1,575,000 -$4,500,000 $3,825,000 Cash flow Discounted cash flow Cumulative discounted cash flow Dischunted payback period years which version of a project's payback period should the Crouse when evaluating Project Alpha, 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 fail to consider the value of the cash flows beyond the point in time equal to the payback period. Ch 11: Assignment - The Basics of Capital Budgeting Year o Year 1 Year 2 -54,500,000 $1,800,000 $3,825,000 s Year 3 $1,575,000 s Cash flow Discounted cash flow Cumulative discounted cash flow Discounted payback period: $ years Which version of a project's payback period should the CFO use when evaluating Project Alpha, 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='s that they fail 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? $2,567,565 $1,216,189 0 $4,435,615 O $1,586,991 The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions Consider the case of Green Caterpillar 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 Alpha'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 received 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.) Year 1 Year o Year 3 -$4,500,000 $1,800,000 Year 2 $3,825,000 S Expected cash flow Cumulative cash flow $1,575,000 Conventional payback period: years The conventional payback period ignores the time value of money, and this concerns Green Caterpillar's cro. He has now asked you to compute Alpha's discounted payback period, assuming the company has a 9% 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 full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer) Ch 11: Assignment - The Basics of Capital Budgeting Year o Year 1 Year 2 Year 3 $4,500,000 $3,825,000 $1,575,000 Expected cash flow Cumulative cash flow $1,800,000 S S S Conventional payback period: years The conventional payback period ignores the time value of money, and this concerns Green Caterpillar's CFO. He has now asked you to compute Alpha's discounted payback period, assuming the company has a 9% 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 full credit, complete the entire table. (Note: If your answer is negative, be sure to use a minus sign in your answer.) Year 0 Year 1 Year 2 Year 3 $1,800,000 $3,825,000 $1,575,000 -$4,500,000 S 5 S Cash flow Discounted cash flow Cumulative discounted cash flow Discounted payback period: S S $ S years Which version of a project's payback period should the CFO use when evaluating Project Alpha, given its theoretical supenority? The regular payback period The discounted payback period One theoretical disadvantage of both payback methods compared to the net present value methods that they fail to consider the value of the cast flows beyond the point in time equal to the payback period T Cash flow $1,800,000 $3,825,000 51,575,000 -$4,500,000 s Discounted cash flow Cumulative discounted cash flow Discounted payback period: 5 $ Years Which version of a project's payback period should the CFO use when evaluating Project Alpha, given its theoretical superiority? The regular payback penod The discounted payback period One theoretical disadvantage of both payback methods-compared to the net present value method - is that they fail 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 recognce due to this theoretical deficiency? $2,867,565 $1,216,189 $4,435,615 51,586,991