Assuming that straight line depreciation is used, the average accounting return for a project is computed as the average:
A) Net income of a project divided by the average total assets of a firm.
B) Book value of a project multiplied by the average profit margin of the project.
C) Book value of a project divided by the average net income of the project.
D) Net income of a project divided by the average investment in the project.
E) Net income of the firm divided by the average investment in a project.

Question

Quizplus · Accepted Answer

The average accounting return (AAR) is calculated as the average net income of a project divided by the average investment in the project. This method provides a simple way to estimate the profitability of a project by comparing the average annual profit to the average amount invested.

Assuming That Straight Line Depreciation Is Used, the Average Accounting