calculation of average book value

[vanessa]

I recall AAR = Average income/average book value
the book value of the years: 300,200,100,0
and average book value = (300+0)/2
is this a short for (300+200+100+0)/4 (which makes more sense to me)
or there is other explanation?

 

[sumit_kansal]

Don’t think so… these could be different..
If you are given beginning and ending values, Avg = BV+EV/2
Ex: if book values are 300, 150, 50,0
per your method: avg = 300+150+50+0/4 = 125.
But correct value is 300+0/2 = 150.

 

[vanessa]

thank you sumit. is there such a formula —- average book value = (beginning + ending )/2 ?

 

[TheAliMan]

simple arithmetic mean