=+E15-3 Average rate ofreturn—

new product ObJ 2

/ Average annual Income, $21 6,000 Airwave Communications Inc. is considering an investment in new equipment that will be used to manufacture a PDA (personal data assistant). The PDA is expected to generate additional an¬

nual sales of 4,800 units at $350 per unit. The equipment has a cost of $910,000, residual value of

$50,000, and a 10-year life. The equipment can only be used to manufacture the PDA. The cost to manufacture the PDA is shown below.

Cost per unit:

Direct labor $ 52.00 Direct materials 195.00 Factory overhead (including depreciation) 58.00 Total cost per unit $305.00 Determine the average rate ofreturn on the equipment.