Accounting Rate of Return (ARR)

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Accounting Rate of Return (ARR) is the average net income an asset is expected to generate divided by its average capital cost, expressed as an annual percentage.

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You made it so so easy and clear to understand
Thanks bro

enouchobwaka
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Thank you. This was so helpful and saved me so much time.

shaymene
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Why are we adding the investment to the salvage value in step 2?

nadiashams
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Why we are dividing the investment value by 2 instead of 5 (years)

farazfowzie
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So if a machine depreciated straight line costs 200, 000 with salvage value of 40, 000 end of 4 years. Net annual earnings 50, 000 per year over 4 years.

The ARR will be 8.3%? Or 5%?

ZAGREAD
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What is the reason you did not subtract the salvage value and added it? I would have subtracted it as it is money coming in not going out. Or, maybe you have a different definition of salvage value?

ramytaraboulsi
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Can we take initial investment instead of average investment in formula for computing ARR?

aayushkumar
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am I the only one who doesn't have a clue what he's on about

AlexMartinez-nvwi
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On step 1, you lost me on how you moved from 75, 000 to 15, 000. A helping hand would be appreciated

ayandah