Consider how Stenback Valley Snow Park Lodge could use capital budgeting to decide whether the $11,000,000 Snow Park Lodge expansion would be a good investment. Assume Stenback Valley's managers developed the following estimates concerning theexpansion:

Number of additional skiers per day

116 skiers

Average number of days per year that weather conditions

allow skiing at Stenback Valley

143 days

Useful life of expansion (in years)

8 years

Average cash spent by each skier per day

$

244

Average variable cost of serving each skier per day

82

Cost of expansion

11,000,000

Discount rate

12%

Assume that Stenback Valley uses the straight-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 $1,387,256 and the depreciation has been calculated as $1,300,000.

Calculate the ARR. Round to two decimal places.

Average annual operating income

/

Average amount invested

=

ARR

/

=

%