Average accounting return is average net profit over average book value.
Average book value is taken by the start and end of the period divided by 2 because it assumes the book value trends from the start value to the end value in a straight line.
So expanding on your example, say across 4 years, profit and book value are:
| Year | Net Profit | Book Value |
| 1 | $ 15,000 | $ 50,000 |
| 2 | $ 25,000 | $ 35,000 |
| 3 | $ 20,000 | $ 20,000 |
| 4 | $ 10,000 | $ 15,000 |
Return on equity:
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