Result
Average annual return
—
Your inputs are stored in this browser, so everything is still here next time. Nothing is sent to a server.
This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Average annual profit = total profit over the whole life ÷ number of years. Average annual return = average annual profit ÷ investment amount × 100%. This is the accounting rate of return (ARR) method — the simplest way to evaluate a project, without accounting for the time value of money.
Unlike IRR, this method doesn't discount future receipts — a dollar of profit in year one and a dollar in the project's last year are treated as equally valuable here, even though the time value of money says otherwise. That makes the method quicker for a rough estimate, but less accurate for comparing projects with very different year-by-year profit patterns.
For a more accurate evaluation that accounts for when money arrives, use the separate NPV and IRR calculators — they discount cash flows and give a more reliable basis for an investment decision, especially if the project's profit is spread unevenly across its years.