The managers of McKinley (Hire Services) Ltd are considering whether to invest in new earth-moving equipment. The equipment will cost 185,000 and will have an expected life of five years. Annual operating profits from the equipment are expected to be as follows:

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	Operating profits
Year 1	33,000
Year 2	27,000
Year 3	21,000
Year 4	18,000
Year 5	12,000

The equipment will be depreciated using the straight line method and, at the end of its useful life, the estimated disposal value is 35,000.The business has a target accounting rate of return of 25% for new investment projects.

	1.	Calculate the accounting rate of return for the earth-moving equipment.
	2.	Should the equipment be purchased?

The accounting rate of return for the earth-moving equipment is ........... %. (Round your answer to the nearest per cent.)

The accounting rate of return is above or below the required accounting rate of return for new projects and so the equipment should be should not be purchased.