Fast Food, Inc., has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years. The following annual donut sales and expenses are projected (Ignore income taxes.):

Sales			$	22,000
Expenses:
Flour, etc., required in making donuts	$	10,000
Salaries		6,000
Depreciation		1,600		17,600
Net operating income			$	4,400

Assume cash flows occur uniformly throughout a year except for the initial investment.

The payback period on the new machine is closest to:

Multiple Choice

• 5 years

• 2.7 years

• 3.6 years

• 1.4 years