Barker Company has an opportunity to purchase a forklift to use in its heavy equipment rental business. The forklift would be leased on an annual basis during its first two years of operation. Thereafter, it would be leased to the general public on demand. Barker would sell it at the end of the fifth year of its useful life. The expected cash inflows and outflows follow.

Required
a. Determine the payback period using the accumulated cash flows approach.
b. Determine the payback period using the average cash flows approach. Round your computation to one decimalpoint.

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Nature of Item Cash Inflow Cash Outflow $72,000 2015 Purchase price 2015 Revenue $30,000 30,000 21,000 Revenue 2017 Revenue 2017 Major overhaul 9,000 Revenue Revenue Salvage value 18,000 14,400 9,600