How much value in this example does the discounted payback period method fail to recognize due to this theoretical deficiency

B. $‭1,696,274‬

Explanation:

The discounted cashflows are;

Year 1 = 1,800,000/ (1 + 8%)  = $1,666,667

Year 2 = 3,825,000/ (1 + 8%)² = $3,279,321

Year 3 = 1,575,000 / (1 + 8%)³ = $1,250,286

The initial investment is $4,500,000. The Discounted payback period fails to consider the cashflow after this has been repaid so the amount that the method does not recognize is;

= 1,666,667 + 3,279,321 + 1,250,286 - 4,500,000

= $‭1,696,274‬

you have to put the parentheses like this:

in fact, you have to perform the operation inside parentheses first, and then proceed in order:

reducing the scale of the market for a new product.