What information does the payback period provide?

Suppose Omni Consumer Productss CFO is evaluating a project with the following cash inflows. She does not know the projects initial cost; however, she does know that the projects regular payback period is 2.5 years.

Year	Cash Flow
Year 1	$375,000
Year 2	$400,000
Year 3	$500,000
Year 4	$425,000

If the projects weighted average cost of capital (WACC) is 9%, what is its NPV?

A.) $342,881

B.) $394,313

C.) $308,593

D.) $411,457

Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply.

[]The discounted payback period does not take the time value of money into account.

[] The discounted payback period does not take the projects entire life into account.

[]The discounted payback period is calculated using net income instead of cash flows.