Accounting Rate of Return

The accounting rate of return is computed by dividing the estimated annual income by the average investment. It is a way of evaluating potential capital investments.

The estimated annual income is the expected return over the life of the project minus depreciation and the average investment is the initial cost + residual value divided by 2.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/accounting-rate-of-return/