Average Rate of ReturnNew Product

Galactic Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 3,500 units at $306 per unit. The equipment has a cost of $325,500, residual value of $24,500, and an eight-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows:

Cost per unit:
	Direct labor		$51.00
	Direct materials		199.00
	Factory overhead (including depreciation)		34.00
		Total cost per unit	$284.00

Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %