Barcelona Company is considering a project with a 5-year life and which would require a $325,000 investment in equipment with no salvage value. The project would provide net income each year as follows for the life of the project:

Sales $225,000

Variable costs 80,000 Fixed costs 95,000 175,000

Income before taxes $ 50,000

The income tax rate is 30%. Depreciation is included in the fixed costs amount. The company's required rate of return is 8%. How much is the payback period for this project?

3.25 years.

6.5 years.

2.83 years.

9.29 years.