ocr: The ARR Formula Since the costs and benetits trom a capital project generally arise over a number ofyears, itis necessary to employ the following specitic formula: ARR Average Annual Pre-Tax Profit x100% Average Capital Employed e.g. Average. Annual Pre-Tax Profit E95,000 Average Capital Employed: Plant and Machinery E400,000/2-t E200,000 Working Capital E100,000 Theretore, using the above formula, The Accounting Kate of Return is; =t E95,000 / E300,000 X 100% ARR - 31.7% ARR Advantages ARR Disadvantages
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