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Sunday, June 5, 2011

Advantages and Disadvantages of ARR

Accounting rate of return (ARR) is a method of comparing the average profits you expect to the amount you need to invest. For instance, if a project requires an average investment of $50,000 and is expected to produce an average annual profit of $2,000, the ARR would be: 2,000 / 50,000 = 4%.

Advantages of using Accounting rate of return:

1) The main advantage is that it is easy to understand

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