The capital budgeting method that divides a project's annual incremental net operating income by the initial investment is the:

Question

Quizplus · Accepted Answer

The method described is the simple rate of return method. It is calculated by dividing the annual incremental net operating income by the initial investment, and represents the percentage return on the investment each year. However, this method does not take into account the time value of money or the full life cycle of the project. Therefore, it should be used in conjunction with other capital budgeting methods to make a well-informed decision.

The Capital Budgeting Method That Divides a Project's Annual Incremental