1. Assume the following information for a capital budgeting proposal with a five-year time horizon:

   Initial investment:
   Cost of equipment (zero salvage value)	$	500,000
   Annual revenues and costs:
   Sales revenues	$	300,000
   Variable expenses	$	130,000
   Depreciation expense	$	50,000
   Fixed out-of-pocket costs	$	40,000

   The payback period for this investment is closest to:

   		6.25 years.
   		1.52 years.
   		3.85 years.
   		2.94 years