Paramount Company Is Considering Purchasing New Equipment Costing $708,000 Residual Value Is Zero

Multiple Choice

Paramount Company is considering purchasing new equipment costing $708,000.The company's management has estimated that the equipment will generate cash flows as follows:
$$\begin{array} { | r|r | } \hline \text { Year } 1 &\$ 202,000 \\\hline 2&202,000 \\\hline 3&254,000 \\\hline 4&254,000 \\\hline 5&150,000 \\\hline\end{array}$$
Residual value is zero.What is the payback period?

A) 3.5 years
B) 4.5 years
C) 3.2 years
D) 3.7 years