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 $300,000 and to have a six-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	$	375,000
Costs
Materials, labor, and overhead (except depreciation)		200,000
Depreciation on new equipment		50,000
Selling and administrative expenses		37,500
Total costs and expenses		287,500
Pretax income		87,500
Income taxes (30%)		26,250
Net income	$	61,250

Required: (1) Compute the payback period.

Payback Period Choose Numerator: 1 Choose Denominator: = Payback Period Payback period