invt appraisal qstn (mcq)

Details of a new machine are as follows:

Capital cost $120,000
Expected operating life
Five years

Expected scrap value at the end of five years $20,000
Annual depreciation $20,000
Expected annual profits from operations $40,000

What is the payback period?

Select one:
3.0 years
2.5 years
2.0 years
1.7 years

sir when calculating payback period = initial invt / cash inflow
does cashinflow include annual profit which is 40000$ and depreciation 20000$ ? sir i want know that in cashinflow we consider scrap value + annual profit ? i think dep not includedbut i am not sure . can you please advise me.. whether m wrong or right .. thank u in advance ..