The computations required for the net present value method are less than those the computation required for the average rate of return method.

Question

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The net present value (NPV) method involves more complex computations, including discounting future cash flows to their present value, which is more computationally intensive than calculating the average rate of return (ARR), which typically involves simpler arithmetic operations based on average annual profit and initial investment.

The Computations Required for the Net Present Value Method Are