Which one of the following is an advantage of the accounting (book) rate of return (ARR) method for analyzing capital investment proposals?
A) It is not affected by different accounting methods.
B) It is precise and objective.
C) Data for calculating the return are typically readily available.
D) The method explicitly adjusts for the time value of money.
E) ARR is generally approximately equal to a project's internal rate of return (IRR).

Question

Quizplus · Accepted Answer

Data for calculating the return are typically readily available, making the ARR method easy to use and apply in practice. However, the ARR method has several disadvantages, including that it does not account for the time value of money and can be affected by different accounting methods. It also does not necessarily approximate a project's internal rate of return (IRR).

Which One of the Following Is an Advantage of the Accounting