Asked by Martie Coleman on Jun 25, 2024
Verified
The accounting rate of return is a capital investment decision model that does not provide for the inclusion of tax effects.
Accounting Rate of Return
A financial metric used to assess the profitability of an investment, calculated by dividing the average return from an investment by the initial cost.
- Absorb the methods for examining and ranking investment projects by leveraging financial criteria such as net present value (NPV), internal rate of return (IRR), and profitability indexes.
Verified Answer
DG
Denisse GarcíaJul 01, 2024
Final Answer :
False
Explanation :
The accounting rate of return (ARR) can include tax effects if the calculation is based on net income after taxes, although it primarily focuses on the project's impact on accounting profits rather than cash flows.
Learning Objectives
- Absorb the methods for examining and ranking investment projects by leveraging financial criteria such as net present value (NPV), internal rate of return (IRR), and profitability indexes.