Bardoo Inc. is looking at replacing some equipment in one of its plants. Relevant data to the purchase of the equipment is as follows :

Cost of the equipment $320,000

Annual saving provided by the new equipment 60,000

Salvage value of the old equipment 30,000

Expected life of the new equipment 8 years

Required:

1. The owner of Bardoo would like to recoup his original investment in less than five years. Compute the payback period for the investment. Would you recommend that the equipment be purchased? Provide a brief explanation as to your recommendation.