A company that manufactures food-grade oil is considering a proposal to construct a large tank to store raw, unrefined oil. This will permit the company to buy raw oil at a more favorable price and...

A company that manufactures food-grade oil is considering a proposal to construct a large tank to store raw, unrefined oil. This will permit the company to buy raw oil at a more favorable price and stockpile it. The cost of the tank is $150,000. The tank is expected to last for 30 years with a salvage value of $10,000 at that time. The anticipated annual savings resulting from stockpiling the raw oil is estimated to be $25,000. Determine the rate of return for this proposal.