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Answered: Which of the following is not an…
Which of the following is not an advantage of the average rate of return method?
a.includes the amount of income earned over the entire life of the proposal
b.takes into consideration the time value of money
c.emphasizes accounting income
d.easy to use
The primary advantages of the average rate of return – The primary advantages of the average rate of return method are its ease of computation and the fact that it emphasizes the amount of income earned over the life of the proposal. Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?Which of the following is not an advantage of the average rate of return method? A. It is easy to use B. It takes into consideration the time value of money C. It includes the amount of income earned over the entire life of the proposal D. It emphasizes accounting incomeProblems with the Simple Rate of Return. While this method has the advantage of being simple and easy to calculate, it also suffers from several problems, which are: Time value of money. The method does not use discounting to reduce the incremental amount of net income to its present value. Instead, it assumes that any net income earned during
Accounting 202 Final Exam Flashcards | Quizlet – The ARR (Accounting Rate of Return) method is used to rank capital projects as per their earning. Projects that are earning the highest are chosen while those which are not performing up to the standard are discarded. The ARR is further sub-divided into average rate of return, average investment, and earnings per division.Question: Which Of The Following Is Not An Advantage Of The Average Rate Of Return Method? A. It Includes The Amount Of Income Earned Over The Entire Life Of The Proposal. B. It Emphasizes Accounting Income. C. It Is Easy To Use. D.Accounting rate of return (ARR) is a formula that reflects the percentage rate of return expected on an investment, or asset, compared to the initial investment's cost.
Simple rate of return definition — AccountingTools – A project costs £29,000 and is expected to have a useful life of three years at which point its scrap value will be £5,000. The project is expected to yield net profits of £1,000 per annum over its useful life. Using the average book value of the asset the accounting rate of return will be:The advantages and disadvantages of the internal rate of return method make it easy to compare some projects. In return, certain decisions may be easier to make. It must also be remembered that the information the IRR provides is somewhat limited and should only be used to compare projects of similar size and scope.Thus, we see that the rate of return approach can be applied in various ways. But, however, in our opinion the third approach is more reasonable and consistent. Advantages of Accounting Rate of Return Method. This approach has the following advantages of its own : (1) Like payback method it is also simple and easy to understand.