Your company has purchased a new piece of equipment for $1,000,000 and the equipment has a useful life of 5 years and uses the straight-line method of depreciation. It is estimated that labor costs and maintenance costs will be reduced by $500,000 per year for the next 5 years. Your company has a hurdle rate of 10%.
Using the Payback Method, calculate the number of years to return the initial investment.
A) Two years
B) One ear
C) Five years
D) Three years
