Final answer:
The accounting return approach, known as ARR, is false in incorporating TVM logic; instead, it relies on book value and ignores the timing of cash flows, unlike methods like NPV or IRR that consider TVM crucial for evaluating long-term investments.
Step-by-step explanation:
The statement: True or False: The accounting return approach to capital budgeting decisions incorporates TVM logic, is false. The accounting return approach, also known as the accounting rate of return (ARR), does not incorporate the time value of money (TVM) logic. Instead, it is based on the book value information from financial statements and calculates the returns ignoring the timing of cash flows, which is a fundamental part of TVM.
Capital budgeting decisions often use more sophisticated methods that account for TVM, such as Net Present Value (NPV) or Internal Rate of Return (IRR), which explicitly consider the value of money over time. Therefore, while ARR can provide some insights, it is limited by its exclusion of TVM considerations, which are crucial for evaluating the financial viability of long-term investment projects.