Evaluating a project by the payback period, rate of return on initial and average investment, and payback reciprocal. The management of the Webb Plastics Company has requested information about a proposal to invest

$2,000,000 in a new plant. A study shows that the plant can produce an annual net income of $300,000 before depreciation. The plant has an estimated useful life of 20 years with no salvage value. Straight-line depreciation will be used.

Instructions 1. Compute the payback period. Round off your answer to one decimal place.

2. Compute the rate of return on investment based on the initial investment and based on the average investment.

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