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The payback method heips firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decsions. Blue Hamster Manufacturing is a

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The payback method heips firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decsions. Blue Hamster Manufacturing is a small firm, and several of its managers are wornied about how soon the firm will be able to recover its initial investment from Project Omega's expected future cash fows. To answer this question, Blue Hamster's CFO has asked that you compote 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 by computing the project's conventional payback period. (Hint? For full credit, complete the entire table. Round the conventional payback period to the nearest hwo decimal places, if your answer is negotive use a minus sign. ) The comventional payback period ignores the time value of moncy, and this concems Blue Hamster's CFO. He has now asked you to compute Omega's discounted payback period, assuming the compary has a 10% cost of copital. Complete the following table and perform amy necessary caloulabions. (Hint: Round the discounted cash Alow values to the nearest whole dollar, and the discounted paytuck period to the nearest two decimat ploces. For foll credit, complete the entire table. If your answer is nogatrve use a minus sign.) Which versipn of a project's payback period should the CFO use when evaluating Project Omega, given its theoretical superionity? The regular parback period The discounted payback period One the oretical disadvantage of both payback methods-compared to the net present value method-is that they faif to consider the value of the cash flows beyond the point in time equal to the payback period. How much value does the discounted payback period method fail to recognize due to this theoretical defiaency? 13,759,579 11,974,455 15,792,637 $1,577,161

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