Evaluating a project by the payback period, rate of return on initial and average investment, and payback reciprocal. The Ryan Furniture Company is thinking of buying a special-purpose machine. The company estimates that it can save $20,000 per year in cash operating costs for the next 8 years if it purchases the machine for $72,000. There is no expected salvage value at the end of the 8-year useful life of the machine.

Instructions 1. Compute the payback period.

2. Compute the rate of return on investment based on the initial investment and _ based on the average investment. Round off to the nearest tenth of a percent.

3. Compute the payback reciprocal. Round off to the nearest tenth of a percent.