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Average Rate of ReturnCost Savings Midwest Fabricators Inc. is considering an investment...

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Accounting

Average Rate of ReturnCost Savings
Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $145,000 with a $12,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $50,120 per year. In addition, the equipment will have operating and energy costs of $14,100 per year.
Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.
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