Master Fab Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $137,000 with a $12,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $27,325 per year. In addition, the equipment will have operating and energy costs of $6,630 per year.
Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.
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