Using the annual rate of return method,

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The annual rate of return method evaluates a project's profitability by comparing its rate of return to a predetermined minimum acceptable rate of return set by management. If the project's rate of return is higher, it is considered acceptable. This method does not inherently consider the time value of money (which is a feature of methods like NPV or IRR) and typically focuses on cash flows rather than accrual accounting numbers.

Using the Annual Rate of Return Method