July Ltd is inteding to purchase a second hand T652 airplane at a cost of 20 million. A further 2,5 million will be expended on the T652 to refurbish the interior before the plane goes into service. July Ltd will operate the plane for its useful life, which is 10 years. T the end of the 10 year period the T652 is expected to have a resale value of 2 million. It is also estimated that the T652 would have a resale value after five years of 6.5 million.

By keeping the plane inservice July Ltd is expected to produce net cash inflows of 3 million in each year.

Assuming the cash flows are expected to occur evenly during each year, what will be the payback period?

A. 5.0 years

B. 5.5 years

C. 7.0 years

D. 7.5 years