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Cardinal Company is considering a five-year project that would require a $3,025,000 investment in equipment with a useful life of five years and no salvage value. The companys discount rate is 16%. The project would provide net operating income in each of five years as follows:
| Sales | $ 2,737,000 | |
|---|---|---|
| Variable expenses | 1,001,000 | |
| Contribution margin | 1,736,000 | |
| Fixed expenses: | ||
| Advertising, salaries, and other fixed out-of-pocket costs | $ 610,000 | |
| Depreciation | 605,000 | |
| Total fixed expenses | 1,215,000 | |
| Net operating income | $ 521,000 |
Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 50%. What was the projects actual simple rate of return? (Round your answer to 2 decimal places.)
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