Answered: The accounting rate of return (also…

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The accounting rate of return (also known as the unadjusted rate of return) can be calculated as

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 14MC: This calculation determines profitability or growth potential of an investment, expressed as a...

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Question

The accounting rate of return (also known as the unadjusted rate of return) can be calculated as: (See your Chapter 25 notes, page 2)

Initial cost of the investment divided by the annual net cash inflow

Initial cost of the investment minus the annual net cash inflow

Average amount of the investment divided by the average annual net income

Average annual net income divided by the average amount of the investment

Present value of net cash inflow divided by the initial cost of the investment

Annual net cash inflow minus the initial cost of the investment

Future value of net cash inflow divided by the initial cost of the investment

Present value of the net cash inflow minus the initial cost of the investment

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