Determining the Appropriate MARR

Abstract

The previous chapters assumed that a stated MARR for a particular asset investment was known. Depending on organizational maturity and accounting policies, MARR may or may not be known for every asset investment type. In small, start-up, entrepreneurial companies with only rudimentary accounting practices, the MARR will most likely be unknown. In more mature, medium-sized companies with maturing management and cost accounting practices, a general MARR may be available for all asset investments. In large corporations with mature management, cost accounting systems, and industrial engineering, a schedule of MARRs will be published by asset risk category. This chapter provides an introductory discussion of how MARR is determined from risk–return analysis. The discussion is a continuation of the finance cycle introduced in Chap. 1.