Average
Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.
Calculation of Average rate of return:
Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the
The reasons for the difference between the average rate of return and the internal rate of return on the same project.
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Chapter 25 Solutions
Financial & Managerial Accounting
- How is the Rate of return is an intuitively familiar and understandable measure of project?arrow_forwardWhen is a project is said to be a net investment?arrow_forwardWhy are NPV, BCR, and IRR considered SUPERIOR indicators of Project Feasibility compared to Payback or Recoupment Period and Accounting Rates of Return? Explain briefly.arrow_forward
- How would you compare two different projects using the net present value method?arrow_forwardWhat are the shortcomings of the internal rate of return criterion? How do you make an investment decision based on the IRR? How would the NPV of the same project look?arrow_forwardWhich provides a better estimate of a project’s “true” rate of return, the MIRR or theregular IRR? Explain.arrow_forward
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