Answer: $1,645,379.41
Explanation:
The deficiency attached to the Discounted Payback period is that it stops recognizing cashflows after the project is paid off.
Year 1 discounted cash flow = 2,000,000/(1 + 10%) = $1,818,181.82
Year 2 discounted cashflow = 4,250,000 / (1 + 10%)² = $3,512,396.69
Year 3 discounted cashflow = 1,750,000/( 1 + 10%)³ = $1,314,800.90
Amount that Discounted Payback period will not recognize is;
= Cumulated discounted cash flow - Initial cost
= 1,818,181.82 + 3,512,396.69 + 1,314,800.90 - 5,000,000
= $1,645,379.41
