NPV is superior to average accounting return as a capital budgeting technique because:

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NPV is superior to average accounting return as a capital budgeting technique because it employs cash flows, which are more relevant and reliable than accounting profits that could be manipulated or distorted by accounting rules and methods. NPV also values each cash flow equally based on dollar value and discounts them back to their present value using the actual cost of an investment. Average accounting return, on the other hand, emphasizes accounting profits and divides them by an accounting measure of investment, which may not reflect the true economic cost and benefits of a project.

NPV Is Superior to Average Accounting Return as a Capital