Category Archives: ARR

Project Analysis | Accounting Rate of Return

Project Analysis – Capital Budgeting Techniques   Nile’s Manufacturing is considering buying automated machinery that costs $250,000. Working capital requirement is $25,000 and they are expecting Annual cash savings of $103,000 for 5 years. The company uses straight-line depreciation method. The salvage value the machinery at the end of year 5 is expected to be… Read More »

Payback Period and ARR Example- Project Analysis

Project Analysis – Capital Budgeting Techniques Solved example of  Payback Period and ARR Steve has been appointed as finance director of a company. His only aim is to gain some experience before moving to a larger company. His intention is to work here for three years and when he would leave the company; its share price… Read More »

Accounting Rate of Return (ARR) | Capital Budgeting Techniques

Accounting Rate of Return – Capital Budgeting Techniques Accounting rate of return is the project evaluation technique which differs from other capital budgeting techniques because the focus of this technique is average annual net income or accounting income rather than cash flows.  ARR is defined as the ratio of average accounting income to average investment. You will find… Read More »