💵Capital Budgeting Formulas

Accounting Rate of Return (ARR)

Average Annual Net Income ÷ Average Investment × 100 = ARR %

What It Means

Average return on investment as a percentage.

Initial Investment ÷ Annual Cash Inflow = Payback Period (years)

Σ (Cash Flow ÷ (1 + r)^n) - Initial Investment = NPV

1 ÷ (1 + r)^n

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