Merits of Average Rate of return Method (ARR)

Merits of ARR method:

1. This method is also easy to understand and simple to operate
2. The ARR method takes into account earnings over the entire economic life of the project.
3. This is really a profitability concept since it considers net earnings after depreciation, i.e., excess of earnings over original cost of investment.
4. Projects which differ widely in character could be compared under this system.