Payback period was the earliest Select - selection criterion. The Salect vis a "break-even calculation in the sense that if a project's cash flows come in at the expected rate the project will break even. The equation is: Number of Payback = years prior to + Ciud few during all come your full recovery The Select a project's payback, the better the project is. However, payback has 3 main disadvantages: (1) All dollars received in different years are given -Select / weight. (2) Cash flows beyond the payback year are ignored. (3) The payback merely indicates when a project's investment will be recovered. There is no necessary relationship between a given payback and investor wealth mandimization A variant of the regular payback is the discounted payback. Unlike regular payback, the discounted payback considers Select costs. However, the discounted payback still disregards cash flows Delect the payback year. In addition, there is no specific payback rule to justify project acceptance. Both methods provide information about - Select and risk. Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis, Both projects after-tax cash flows are shown on Doe time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 11% 0 1 2 3 4 400 335 250 400 750 Project A -900 650 300 Project B -900 250 What is Project. A's payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project A's discounted payback? Do not round Intermediate calculations. Round your answer to four decimal places, years What is Project B's payback? Do not round intermediate calculations, Round your answer to four decimal places, years What is Project B's discounted payback? Do not round intermediate calculations, Round your answer to four decimal places years Save & Continue