# The payback method

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:

Don't use plagiarized sources. Get Your Custom Essay on
The payback method
From \$8/Page

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 Beta’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.)

Year o Year 3 Year 1 \$2,400,000 Year 2 \$5,100,000 -\$6,000,000 \$2,100,000 Expected cash flow Cumulative cash flow Conventional payback period: years

The conventional payback period ignores the time value of money, and this concerns Cute Camel’s CFO. He has now asked you to compute Beta’s discounted payback period, assuming the company has a 7% cost of capital. Complete the following table and perform any necessary calculations. Round the discounted cash flow values to the nearest whole dollar, and the discounted payback period to the nearest two decimal places. For full credit, complete the entire table. (Note: If your answer is negative use a minus sign.)

Year o Year 2 Year 3 Year 1 \$2,400,000 Cash flow -\$6,000,000 \$5,100,000 \$2,100,000 Discounted 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 Beta, given its theoretical superiority?

O The regular payback period

O 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?

O \$1,714,226 O \$3,957,217 O \$6,168,764 O \$2,411,755. Get Finance homework help today

# What Will You Get?

We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.

Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.

#### Experienced Writers

Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.

#### On-Time Delivery

Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.

#### Complete Confidentiality

Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.

#### Authentic Sources

We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.

#### Moneyback Guarantee

Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.

#### Order Tracking

You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.

#### Areas of Expertise

Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.

# Trusted Partner of 9650+ Students for Writing

From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.

##### Preferred Writer

Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.

##### Grammar Check Report

Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.

##### One Page Summary

You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.

##### Plagiarism Report

You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.

## Free Features \$66FREE

• Most Qualified Writer \$10FREE
• Plagiarism Scan Report \$10FREE
• Unlimited Revisions \$08FREE
• Paper Formatting \$05FREE
• Cover Page \$05FREE
• Referencing & Bibliography \$10FREE
• Dedicated User Area \$08FREE

#### Our Services

• On-time Delivery

We create perfect papers according to the guidelines.

##### Professional Editing

We seamlessly edit out errors from your papers.

Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!

# Check Out Our Sample Work

Dedication. Quality. Commitment. Punctuality

Categories
All samples
Literature Analysis/Review
Annotated bibliography
Essay (any type)
Literature Analysis/Review
Thesis Statements Review
English 101
1
Annotated bibliography
Reflective Annotated Bibliography
English 101
1
Essay (any type)
Components of Research Questions
Nursing
2

# It May Not Be Much, but It’s Honest Work!

Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.

# Process as Fine as Brewed Coffee

We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.

# See How We Helped 9000+ Students Achieve Success

#### We Analyze Your Problem and Offer Customized Writing

We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.

• Clear elicitation of your requirements.
• Customized writing as per your needs.

#### We Mirror Your Guidelines to Deliver Quality Services

We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.

• Proactive analysis of your writing.
• Active communication to understand requirements.