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Cardinal Company is considering a project that would require a $2,765,000 investment in equipment with a useful life of five years. At the end of

Cardinal Company is considering a project that would require a $2,765,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $200,000. The companys discount rate is 12%. The project would provide net operating income each year as follows:

Sales $ 2,861,000
Variable expenses 1,101,000
Contribution margin 1,760,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $ 705,000
Depreciation 513,000
Total fixed expenses 1,218,000
Net operating income $ 542,000

Required: If the equipments salvage value was $400,000 instead of $200,000, what would be the projects simple rate of return? (Round your answer to 2 decimal places.)

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