A company is considering investing in a project warehouse with a 10-year useful life that would require a $400,000 investment in equipment that has no salvage value.

The company's required rate of return on this possible investment is 12%.

The warehouse would create net operating income each year for its 10-year useful life, as follows:

Question: What is the Payback Period for this project? You must give the answer and show your work on how you calculated this answer to get full credit. If you only provide the answer, you get no credit.

Sales		$500,000
Less cash variable expenses		$200,000
Contribution margin		$300,000
Less fixed expenses:
Fixed cash expenses	$100,000
Depreciation expenses	$40,000	$140,000
Net operating income		$160,000