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Average Rate of Return—Cost Savings Sager Industries is considering an investment in equipment that will replace...

Average Rate of Return—Cost Savings Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $118,000 with a $10,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages of $29,320 per year. In addition, the equipment will have operating and energy costs of $5,720 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. %

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