The accounting rate of return calculations ignores the time value of money,but the payback period does include consideration of the time value of money.

Question

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The accounting rate of return (ARR) calculation does not include consideration for the time value of money, while the payback period method does not explicitly account for the time value of money but implicitly reflects it by looking for the time it takes for a project to recover its initial investment.

The Accounting Rate of Return Calculations Ignores the Time Value