Utilize our complimentary Accounting Rate of Return (ARR) Calculator to efficiently evaluate the profitability of potential capital investments. This essential tool helps businesses and investors compare project returns, aiding in crucial capital budgeting and strategic financial planning. Quickly determine the average annual net income as a percentage of your initial investment.
Formula:
Accounting Rate of Return (ARR) Formula:
ARR = (Average Annual Net Income / Initial Investment Cost) × 100%
Where:
- Average Annual Net Income = (Average Annual Revenue - Average Annual Operating Expenses - Annual Depreciation)
- Annual Depreciation = (Initial Investment Cost - Salvage Value) / Project Life (in years)
The Initial Investment Cost represents the total capital outlay required for the project.