Answer:
Average rate of return = 14
%
Explanation:
Average rate of return = Annual average return/ Average Investment
Average investment =( Initial investment + scrap value)/2
Average investment = 138,000 + 12,000/2 =75,000
Average annual return = Savings in cost - energy cost - depreciation
Depreciation = (initial cost - scrap value)/2= (138,000 - 12,000)/2= 12600
Average annual return = 29,780-6,680-12600= 10500
Average rate of return = 10,500/75,000 × 100= 14
%
Average rate of return = 14
%
