The Whispering Winds Company is planning to purchase $612,800 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment.

Year Projected Cash Flows 1 $261,000 2 176,600 3 126,900 4 82,800 5 82,800 6 53,500 7 53,500 Total $837,100

(a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year.

Payback period years and months.

(b) If Whispering Winds requires a payback period of three years or less, should the company make this investment?

The company should not should make this investment.