The method of evaluating long-term capital investments that expresses the average future increased profits as a percentage of the initial investment is the
A) Payback method
B) Net present value method
C) Internal rate of return method
D) Accounting rate of return method

Question

Quizplus · Accepted Answer

The Accounting rate of return method is the method of evaluating long-term capital investments that expresses the average future increased profits as a percentage of the initial investment. The Payback method calculates the time required to recover the initial investment, the Net present value method calculates the present value of future cash inflows minus the present value of cash outflows, and the Internal rate of return method calculates the discount rate that makes the net present value of all cash flows equal to zero.

The Method of Evaluating Long-Term Capital Investments That Expresses the Average