The average rate of return method of capital investment analysis gives consideration to the present value of future cash flows.

Average Rate of Return

A financial metric used to assess the profitability of an investment, measuring the average annual return compared to the initial investment cost.

Present Value

The current value of a future amount of money or stream of cash flows, given a specified rate of return.

Capital Investment Analysis

The process of evaluating and comparing the potential returns of making a new investment in capital assets, considering factors like cost, risks, and future cash flows.