资本回报率(ROCE or as it is有时被称为“回报率(ARR)”方法)评估资本项目的方法是评估公司的资本回报率(即总债务和股本)。如果它超过了目标回报率，项目就会进行。可以这样计算:
Having so many advantages, there are still some disadvantages of using the discounted payback period method for appraising projects. It even ignores the cash flows after the end of payback period and therefore the total project return. A project may give higher returns in aggregate but payback period takes into account the returns achieved only until the project pays back its initial investment.
The Return on capital employed (ROCE or as it is sometimes referred to as the accounting rate of return (ARR) method) of appraising a capital project is to estimate the return on capital employed in the company, (i.e. total debt and equity). If it exceeds a target rate of return, the project will be undertaken. It can be calculated in this way:
Return on Capital Employed (ROCE): The ROCE can be calculated by this formula:
Average capital employed x 100%
Average annual accounting profits
Average Capital Employed = (Initial capital cost + net proceeds from scrap of project) / 2
Fortunately for non-accountants, ROCE is simpler to calculate than other discounted cash flow methods like NPV or IRR. It looks at the aggregate accounting profits achieved in the entire project life.
There are some drawbacks of applying ROCE too while evaluating whether a project should be accepted or not. It is based on accounting profits and not cash flows. Accounting profits are subject to a number of different accounting treatments. Moreover, from a global perspective, accounting profits follow different accounting standards which vary from country to country. It is not necessary if all companies worldwide follow the same international accounting standards (IASs). Here too, there is no consideration given to the size of the investment. A bigger investment will certainly give a bigger return, but this is not depicted from the results of ROCE. Like the payback period method, it also ignores the time value of money.