Final answer:
The simple rate of return method does not consider the time value of money, thus the statement is false. It is a straightforward measure of the profitability of an investment but fails to account for how the value of money changes over time.
Step-by-step explanation:
The statement that the simple rate of return method is desirable because of its simplicity and the fact that it takes the time value of money into account is false. The simple rate of return method is indeed appreciated for its ease of understanding and application, as it simply involves finding the percentage increase on an investment or project. However, it does not factor in the time value of money, which is a critical element in more complex valuation and investment appraisal techniques like Net Present Value (NPV) and Internal Rate of Return (IRR).
The simplest example of a rate of return is the interest rate, such as when money is deposited into a savings account at a bank. In this example, the interest paid is a percentage of the deposits. This is similar to paying interest on a loan when you borrow money to purchase items like a car or a computer. Understanding these concepts is important when evaluating investment opportunities and their respective risks and returns.