ARR and ARR

This topic has 4 replies, 2 voices, and was last updated 8 years ago by John Moffat.

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June 7, 2017 at 11:05 am #391272
rustamrakhmatov27
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Hello sir.
There are Payback period (no discounting) and Adj payback period (discounted)
I have seen ARR both with discounting and without.
How is examiner gonna ask ARR when he wants discounted Cash flows?
Adjusted ARR?
June 7, 2017 at 2:46 pm #391345
John Moffat
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You cannot possibly have seen ARR with discounting. ARR is a profit measure and discounting only applies to cash flows.
There is no such thing as ‘adjusted ARR’.
June 7, 2017 at 6:28 pm #391519
rustamrakhmatov27
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so the future cash flows will be before discounting always??
June 7, 2017 at 6:29 pm #391521
rustamrakhmatov27
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and we use Future values to find Av profit (CASH – TOTAL DEPRECIATION)??
June 8, 2017 at 7:34 am #391705
John Moffat
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We are always using profits. How we get the profits depends on the information given in the question, but the only difference between net cash flow and profit is depreciation.
Think back to Paper F3 – profits are profits and discounting has nothing to do with it.
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