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Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The...

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Accounting

Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $120,000 with a $10,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $43,410 per year. In addition, the equipment will have operating and energy costs of $11,660 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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