Minnehaha Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $200,000. The equipment will have an initial cost of $1,000,000 and have an 8 year life. If there in no salvage value of the equipment, what is the payback period?
a) 1.6 years
b) 3.08 years
c) 5 years
d) 8 years