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 4,600 units at $178 per unit. The equipment has a cost of $513,400, residual value of $38,600, 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$29.00Direct materials111.00Factory overhead (including depreciation)18.80Total cost per unit$158.80

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

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