Which version of the project's payback period should the CFO use when evaluating Project Delta, given its theoretical superiority?

A. The regular payback period

B. 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 does the discounted payback period method fail to recognize due to this theoretical deficiency?

A. $1,285,669

B. $1,808,815

C. $4,626,572

D. $2,967,912

The payback method helps firms establish and identify a maximum acceptable payback period that helps in their capital budgeting decisions Consider the case of Fuzzy Button Clothing Company: Fuzzy Button Clothing Company is a small firm, and several of its managers are worried about how saon the firm will be able to recoverits initial investment from Project Beta's expected future cash ows. To answerthis question, Fuzzy Button's CFO has asked that you compute the project's payback period using the following expected net cash fows 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 Year 1 Year 2 Year 0 Year 3 8o0,000 3,825,0DD $1,575,000 Expected cash flow Cumulative cash fow -4,500,DDD$1,80D,DDD Conventional payback period: The conventional payback period ignores the time value of money, and this concerns Fuzzy Button's CFO. He has now asked you to oompute Beta's discounted payback period, assuming the company has a 7% oost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash low values to the nearest whole dollar, and the discounted payback period to the nearesttwo decimal places. For full credit, complete the entire table. Year 0 Year 1 Year 2 Year 3 Cash low Discounted cash low Cumulative discounted cash ow 800,000 $3,825,000 $1,575,000 -4,500,0DD$1,80D,DDD Discounted payback period