The payback period

The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions.

Consider the case of Cute Camel Woodcraft Company:

Cute Camel Woodcraft Company 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 Sigma's expected future cash flows. To answer this question, Cute Camel'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 the nearest two decimal places. If your answer is negative use a minus sign.$)$

$\backslash$table$[[,$Year $0,$Year $1,$Year $2,$Year $3],[$Expected cash flow,$-$$$5,000,000,$$$2,000,000,$$$4,250,000,$$$1,750,000$