Oasis Corp is considering the purchase of a new piece of equipment, which would have an initial cost of $1,000,000 and a 5 year life. There is no salvage value for the equipment. The increase in cash flow each year of the equipment's life would be as follows:
Year 1 $375,000
Year2 $350,000
Year 3 $285,000
Year 4 $230,000
Year 5 $185,000
What is the payback period?
a. 2.39 years
b. 2.96 years
c. 3.00 years
d. 3.51 years