All of the following are advantages of using the average rate of return except a.the average rate of return method emphasizes accounting income, which is often used by investors and creditors in evaluating management performance. b.the average rate of return method uses present values. c.the average rate of return method includes the entire amount of income earned over the life of the proposal. d.the average rate of return is easy to compute.

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01-06-2021
Business

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All of the following are advantages of using the average rate of return except a.the average rate of return method emphasizes accounting income, which is often used by investors and creditors in evaluating management performance. b.the average rate of return method uses present values. c.the average rate of return method includes the entire amount of income earned over the life of the proposal. d.the average rate of return is easy to compute.

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Anthougoidn Anthougoidn · Answer 1 · 2021-06-02T20:54:13-04:00

Answer:

Advantages of using the average rate of return except:

b.the average rate of return method uses present values.

Explanation:

The company's average rate of return or the accounting rate of return (ARR) ignores the time value of money or the cash flows in its calculations. It is a simple capital evaluation method which calculates the ratio based on the percentage of annual returns over the project's initial cost. The ARR is not like other investmental appraisal methods, it bases its calculations on accounting profits rather than cash flows.

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