Average Rate of Return

Lakeland Company is considering the purchase of equipment for $$175,000.$ The equipment will expand the Company's production and increase revenue by $$40,000$ per year. Annual cash operating expenses will increase by $$12,000.$ The equipment's useful life is $10$ years with no salvage value. Lakeland uses straight$-$line depreciation. The income tax rate is $25\%.$ What is the average rate of return on the investment?

Do not use negative signs with your answers.

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