Below are two potential investment alternatives:
Assume straight-line amortization in all computations, and ignore income taxes.
-The accounting rate of return based on INITIAL investment in case A is
A) 6.67 percent.
B) 5.56 percent.
C) 2.49 percent.
D) 40.00 percent.

Question

Below are two potential investment alternatives:
  Assume straight-line amortization in all computations, and ignore income taxes.
-The accounting rate of return based on INITIAL investment in case A is
A) 6.67 percent. 
B) 5.56 percent. 
C) 2.49 percent. 
D) 40.00 percent.

Quizplus · Accepted Answer

The accounting rate of return (ARR) is calculated by dividing the average annual profit by the initial investment. If the ARR is 6.67 percent, it means that the average annual profit is 6.67 percent of the initial investment.

Below Are Two Potential Investment Alternatives