The paper attempts to estimate social rates of return in Pakistan’s large-scale manufacturing sector. As cut-off rates, they can help in the selection of public and private sector projects and can also be used as’ estimates of the Accounting Rate of Interest (ARI) which can then be used as test discount rates in the economic analysis of projects. In the context of Pakistan, our study makes an important contribution in that whereas the discount rates hitherto used in the country for an economic appraisal of projects have all been determined arbitrarily,1 we, in this study provide first ever rates that have been arrived at empirically. For example, the discount rate used in both private and public sector investment projects for a considerable period of time was arbitrarily fixed at 12 percent. The reason given for choosing this estimate was that it was based on the rate used by lending institutions on the loans they advanced to various development-oriented agencies. The Fifth Five Year Plan (1978-83) raised this rate to 20 percent for the industrial projects which were to be undertaken in the public sector because it required this sector to generate more funds . Also, during this period, it had been decided that a cut-off rate of 15 percent would be applicable to private-sector industrial projects because the private sector investors complained that if the higher figure of 20 percent was used as a discount rate, then the Bruno Ratio, which measures the domestic cost of saving one unit of foreign exchange and also serves as a criterion of profitability, would decrease to such an extent that the project would become unprofitable.