Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $371,000 and to have a seven-year life and no salvage value. It will be depreciated on a straight-line basis. Business Solutions expects to sell 100 units of the equipments product each year. The expected annual income related to this equipment follows.

Sales	$	382,000
Costs
Materials, labor, and overhead (except depreciation)		192,000
Depreciation on new equipment		53,000
Selling and administrative expenses		36,000
Total costs and expenses		281,000
Pretax income		101,000
Income taxes (35%)		35,350
Net income	$	65,650

Required: (1) Compute the payback period.