Answer: Accounting rate of return
Explanation:
The accounting rate of return is the percentage rate of return that is expected on an asset or investment as compared to the initial investment cost of the investment.
In an accounting rate of return, the average revenue from an asset.is divided by the company's initial investment in order to derive the ratio or the return that can be gotten over the lifetime of the investment or asset. The accounting rate of return does not consider cash flows or the time value of money.
Answer:
A. Accounting rate of return method
Explanation:
Accounting rate of return method (ARR) is used to express the expected rate of return on an investment. It describes assets as compared to initial investment cost. A pitfall to the ARR method is that it doesnt consider cash flow or the time value of money.
Mathematically, it is calculated as
ARR = Average annual income/initial investment
Where
ARR = Accounting rate of return.
ARR helps us in determining the profitability of an investment.
