\(\mathrm{Average\: rate\: of\:return\:formula\:} = \mathrm{\frac{average\: annual\: net\: earnings\: after\: taxes} {initial \:investment}}\times\mathrm{100\%}\)
The formula for an average rate of return is derived by dividing the average annual net earnings after taxes or return on the investment by the original investment or the average investment during the life of the project and then expressed in terms of percentage.
