Question

Green Caterpillar Garden Supplies Inc. is a small firm, and several of its managers are worried about how soon th Firm will be able to recover its initial investment from Project Delta's expected future cash flows. To answer this question, Green Caterpillar'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 two decimal places. Year 0 -6,000,000 Year 1 $2,400,000 Year 2 $5,100,000 Year 3 $2,100,000 Expected cash flow Cumulative cash flow Conventional payback period: The conventional payback period ignores the time value of money, and this concerns Green Caterpillar's CFO. He has now asked you to compute Delta's discounted payback period, assuming the company has a 10% 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. Les Zx0Pw] e a

Answer 1

	Year 0	Year 1	Year 2	Year 3
Expected Cash flow	-6000000	2400000	5100000	2100000
Cumulative Cash flow	-6000000	-3600000	1500000	3600000
Conventional payback	1.705882353
Discounted Cash flow	-6000000	2181818.182	4214876.033	1577761.082
Cumulative discounted cash flow	-6000000.00	-3818181.82	396694.21	1974455.30
Discounted payback	1.9059

The discounted payback period

1974455