Keenlen Inc. is considering the purchase of new manufacturing equipment requiring an initial \(\$ 580,000\) investment and having an expected eight-year useful life. At the end of its life, the equipment would have no salvage value. By installing the new equipment, the firm's annual labor and quality costs would decline by \(\$ 130,000\).

a. Compute the payback period for this equipment.

b. Assume instead that the annual cost savings would vary according to the following schedule:

Compute the payback period under the revised circumstances.

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Years Annual Cost Savings 1 2..... $100,000 130,000 3. 150,000 4 160,000 5..... 160,000 6..... 120,000 7..... 120,000 8 100,000