What is accounting rate of return? What is ARR Formula?
What is ARR?
Measure of an investment’s profitability.
A project is accepted if ARR > target average return.
ARR = average net profit / average book value
Where:
average net profit is total profit over ‘n’ years divide by ‘n’
average book value is (initial investment + salvage value)/2
average net profit is total profit over ‘n’ years divide by ‘n’
average book value is (initial investment + salvage value)/2
What is payback period?
What is the advantages or disadvantages of ARR?
What are the other methods of project evaluation?
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