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Saturday, June 4, 2011

Accounting Rate of Return (ARR) Examples

Definition: Accounting rate of return (ARR, also known as average rate of return) is used to estimate the rate of return for an investment project. The higher the ARR, the more attractive the project is. If the ARR is higher than the minimum standard average rate of return, then we will accept the project. However, this technique does not take into account of the time value of money.

Calculation

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