AAR - Average Annual Return
Average Annual Return (AAR) is a ratio of all cash flow related to investment and number of years of lifetime of the investment.
Average Annual Return usually just AAR, is a ratio of all cash flow related to the investment and the number of years of the investment´s lifetime.
- øCF… average annual return
- CFi… cash flow related to investment
- n… lifetime of the project (investment)
What is AAR for in practice?
In an enterprise it used by the CFO in assessing the effectiveness of an investment. Nowadays, this method is rarely used.