The investment decision rule that relates average net income to average investment is the:
A)discounted cash ﬂow method.
B)average accounting return method.
C)average payback method.
D)average proﬁtability index.
E)None of the above.

Question

Quizplus · Accepted Answer

The average accounting return method is the investment decision rule that relates average net income to average investment. The discounted cash flow method considers the time value of money and calculates the present value of future cash flows. The average payback method calculates the number of years it will take to recoup the initial investment. The average profitability index compares the present value of expected cash inflows to the initial investment. Therefore, option B is the best choice.

The Investment Decision Rule That Relates Average Net Income to Average