Which one of the following is calculated by dividing average annual net operating income of a proposed project by the average investment associated with the project?
A) Profitability index (PI).
B) Payback period.
C) Accounting (book) rate of return (ARR).
D) Internal rate of return (IRR).
E) Net present value (NPV).

Question

Quizplus · Accepted Answer

The accounting (book) rate of return (ARR) is calculated by dividing the average annual net operating income of a proposed project by the average investment associated with the project. ARR is a method of evaluating the profitability of an investment by comparing the expected returns to the average investment required to make those returns.

Which One of the Following Is Calculated by Dividing Average