Accounting rate of return (ARR) is a method of finding out the expected amount we will earn from the projects which we have started today and the investment made on the initiation of those projects.
The ARR formula divides an average net income expected against the average capital cost incurred to derive an expected annual return over the investment or assets. The ARR formula is used to make capital budgeting decisions by managers. Companies use this percentage in deciding on whether or not to invest in a specific project or buying an asset based on the expected return they will earn as compared to the capital cost.
Peng Company is considering an investment expected to generate an average net
B2B Co. is considering the purchase of equipment that would allow
Yummy Candy Company is considering purchasing a second chocolate dipping machine in
Lethbridge Company runs hardware stores in Alberta. Lethbridge’s management estimates that
Southern Cola is considering the purchase of a special-purpose bottling
Nate Stately, a manager of the Plate division for the Great
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Cindy Alexander, Turner, Inc.’s vice president of marketing
Crichton Publications uses the accounting rate of return method to evaluate proposed
Homer Inc. plans to purchase a new rendering machine for its