**Answer:**

**average rate of return = 13 % **

**Explanation:**

**given data **

equipment cost = $125,000

residual value = $15,000

time = 8 year

Annual Average wage = $28000

Annual operating and energy costs = $5,150

**to find out **

average rate of return

**solution**

first we get here depreciation expenses that is here as

Depreciation expense = ( equipment cost - residual value ) ÷ time period .........1

Depreciation expense =

**Depreciation expense = $13750**

so average annual income will be here as

average annual income = Annual Average wage - Depreciation expense - Annual operating and energy costs ....................2

average annual income = $28,000 - $13750 -$5150

**average annual income = $9100 **

and average investment will be

average investment =

**average investment = $70000 **

so average rate of return will be here as

average rate of return = ..............3

average rate of return =

average rate of return = 0.13

**average rate of return = 13 % **