Eric Sander, a manager of the Plate Division for the MarbleTop Manufacturing company, has the opportunity to expand the division by investing in additional machinery costing $490,000. He would depreciate the equipment using the straight-line method and expects it to have no residual value. It has a useful life of 7 years. The firm mandates a required rate of return of 12% on investments. Eric estimates annual net cash inflows for this investment of $125,000 before taxes and an investment in working capital of $10,000 that will be returned at the project's end.

Questions: Show your work.

Calculate the accrual accounting rate of return on initial investment for this project.