Answered: Does the accounting (book) rate of…

Does the accounting (book) rate of return (ARR) method provide a valid (or, meaningful) measureof the return on investment? How about the investment’s internal rate of return (IRR)?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 29GI

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Question

Does the accounting (book) rate of return (ARR) method provide a valid (or, meaningful) measure
of the return on investment? How about the investment’s internal rate of return (IRR)?

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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