Average Accounting Return (AAR)

THE AVERAGE ACCOUNTING RETURN (AAR) AAR=Average net income/Average book value Average book value or average investment can be exchanged Project Decision: AAR > target AAR, so accept the project AAR < target AAR, so reject the project Advantages for Average Accounting Return (AAR): Easy to calculate Needed information will usually be available. Disadvantages for Average Accounting Return (AAR): Not a