Consider how Cole Valley Stream Park Lodge could use capital budgeting to decide whether the $12,500,000 Stream Park Lodge expansion would be a good investment. Assume Cole Valley's managers developed the following estimates concerning theexpansion:

Assume that Cole Valley uses thestraight-line depreciation method and expects the lodge expansion to have a residual value of $600,000 at the end of its eight-year life. The average annual operating income from the expansion is $1,193,035 and the depreciation has been calculated as $1,487,500.

Calculate the ARR.

Average annual operating income / Average amount invested = ARR

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Round to two decimal places.