A strength of the average accounting return (AAR) method of project analysis is the fact that AAR:
A) ignores the issue of taxes.
B) uses a cutoff rate.
C) considers the time value of money.
D) is easy to calculate.
E) is based on accounting values.

Question

A strength of the average accounting return (AAR) method of project analysis is the fact that AAR: 
A) ignores the issue of taxes. 
B) uses a cutoff rate. 
C) considers the time value of money. 
D) is easy to calculate. 
E) is based on accounting values.

Quizplus · Accepted Answer

A strength of AAR is its simplicity and ease of calculation. It is based on accounting values, which may be a disadvantage in some respects, but it does make the method more straightforward to apply. However, AAR does not consider the time value of money or taxes, and it does not use a cutoff rate, which are potential weaknesses of the method.

A Strength of the Average Accounting Return (AAR) Method of Project