Oahu 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 40,000 units at $80 per unit. The equipment has a cost of $7,400,000, residual value of $600,000, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor Details Direct materials Factory overhead (including depreciation) Total cost per unit Determine the average rate of return on the equipment. HIDE ANSWER Answer: Check Figure: Average annual income, $1,200,000 $ 5 35 10 $50