Arrowhead Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications product. The product is expected to generate additional annual sales of 24,000 units at $400 per unit. The equipment has a cost of $27,000,000, residual value of $1,800,000, and a 10-year life. The equipment only can be used to manufacture the product. The cost to manufacture the product is shown on the next page.

Cost per unit:

Direct labor .............. $ 40.00

Direct materials ............. 60.00

Factory overhead (including depreciation) . 120.00

Total cost per unit ............ $220.00

Determine the average rate of return on the equipment.