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A comparison of rate of return and present/annual worth of methods leads to the conclusion that the two sets of methods when properly used give opposing decisions.

a. True
b. False

1 Answer

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Final answer:

The statement that rate of return and present/annual worth methods give opposing decisions is false. Both methods are used to evaluate investment viability from different perspectives, often in combination for a holistic understanding of future returns and current valuation.

Step-by-step explanation:

The question you're asking pertains to the relationship between rate of return methods and present/annual worth methods in terms of financial decision-making. The assertion that these two sets of methods give opposing decisions when properly used is false. Both methods aim to evaluate the viability of investments, but they do so from different angles. The rate of return method focuses on the percentage return of an investment over a period, which is a reflection of the investment's profitability.

On the other hand, the present/annual worth methods involve discounting future cash flows to their present value to understand what an investment is worth today. While high rates of return are generally sought after, it's also important to consider the present worth of an investment to make informed decisions, especially when accounting for the time value of money. In reality, investors often use a combination of these methods to evaluate the true potential of an investment taking into account both future returns and present valuation.

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