Answer Happy

Newman Labs is considering buying equipment, which would enable the company to obtain a five-year research contract. The specialized equipment costs $650,000 and will have no salvage value when the five-year contract period is over. The estimated annual operating results of the project are as follows: Revenue $ 750,000 Expenses (including straight-line depreciation) (650,000) Increase in net income $ 100,000 All revenue from the contract and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. The payback period for the investment in equipment is closest to: a. 1 years. b. 2.8 years c. 5 years. d. 2.5 years.