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Consider the following case:

Fuzzy Button Clothing 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 Betas expected future cash flows. To answer this question, Cold Gooses CFO has asked that you compute the projects 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 projects conventional payback period. Round the payback period to the nearest two decimal places. Be sure to complete the entire tableeven if the values exceed the point at which the cost of the project is recovered.

The conventional payback period ignores the time value of money, and this concerns Cold Gooses CFO. He has now asked you to compute Betas 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. Again, be sure to complete the entire tableeven if the values exceed the point at which the cost of the project is recovered.

be able to re ver b hfd resmst from Rujst Deta's pstsd future cash flows To rewerthk question, Rurr eutton's ? hes ked tht you pute the pujst's peybeck Psmod Lkg the following ?psttd nst cash Complet the filloingtabe andconpute the pujacts CTEtianl paybecd psiad. Far ful crdk, conplet the strtabe. Year$000 Expettedcash flow Cumdativecah flow 4,500,000 *1,900,000 ?3,825,000 * 1,575,000 Cavetanal peybedk perad: ded you to c mpute Detas dscounted peybeck psriad, suming the c mpany hes a 7% cnstofaital. Dmplet the fllowng tabe and peform a nrearcaoiathns. Round the dscounted ch flow veluesto the narest whaledller, and the dcounted paybeck psiad to the naresttwo demapac. Far ful credt, complststhe etretabe. Yar o Yar 2 Cash low Diaunted cah flow Cumdative dscounted cash fow 4,500,000$130o,coo3S2s,000$ 1,575,000 Discounted paybek psad: supsiarity? One theo t cel dsadrantage of bstpeybeck methods-cmpared to the nst F-st velue method-k tha: thEffal Haw much velue does the discounted paybek periad methad fall to recngnzr dueto thib theoretcal dficiacy? O $1385,669 O t625572 967,912 O $138,315

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