ABSTRACT
This is yet another useful method for comparing the financial advantages of alternative
systems using the cash flow diagram. We calculate that specific rate of interest for the system
that makes the net present value equal to zero. This rate is called the rate of return (ROR) and
is denoted by /* if this rate is higher than the minimum rate that satisfies the investor or the
project manager, then the project is acceptable. This minimum rate is called the Minimum
Acceptable Rate of Return (MARR). There is no mathematical formula for calculating
MARR. This has to be done by trial and error. Fortunately, there are computer programs that
make this calculation simple and fast. Most of the spreadsheets on the market, such as
Quattro Pro, Excel, etc., have provisions for calculating the rate of return.
