Sprouse Company is considering an investment in equipment that will replace direct labor. The equipment has a
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Sprouse Company is considering an investment in equipment that will replace direct labor. The equipment has a cost of \($64,000,\) with a \($6,000\) residual value and an 8-year life. The equipment will replace one employee who has an average wage of \($24,000\) per year. In addition, the equipment will have operating and energy costs of \($9,400\) per year.
Determine the average rate of return on the equipment.
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