Year 0Year 1Year 2Year 3Expected cash flow-$4,500,000$1,800,000$3,825,000$1,575,000Cumulative cash flow conventional payback period:years

The conventional payback period ignores the time value of money, and this concerns Blue Hamster's CFO. Compute Omega's discounted payback period, assuming the company has a 8% cost of capital.

Year 0Year 1Year 2Year 3Cash flow-$4,500,000$1,800,000$3,825,000$1,575,000Discounted cash flow cumulative discounted cash flow discounted payback period:years

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

The regular payback period?

The discounted payback period?

How much value does thediscountedpayback period method fail to recognize due to this theoretical deficiency?

Answer rating: 100% (QA)

Discounted Payback Period Calculation Step 1 Calculate the Present Value PV of each cash flow using ... View the full answer