New piece of equipment-what is the payback period

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Reference no: EM13823907

Oasis Corp is considering the purchase of a new piece of equipment, which would have an initial cost of $1,000,000 and a 5 year life. There is no salvage value for the equipment. The increase in cash flow each year of the equipment's life would be as follows:

Year 1 $375,000

Year2 $350,000

Year 3 $285,000

Year 4 $230,000

Year 5 $185,000

What is the payback period?

a. 2.39 years

b. 2.96 years

c. 3.00 years

d. 3.51 years

Reference no: EM13823907

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