Question

Management prefers investments with a higher accounting rate of

return, and they normally set a minimum required rate of return.
T/F?

Answer 1

Answer: True

Explanation: First start with what is ARR

The accounting rate of return (ARR) formula is helpful in determining the annual percentage rate of return of a project. ARR is calculated as average annual profit / initial investment. ARR is commonly used when considering multiple projects, as it provides the expected rate of return from each project.

It prefer investments with a higher accounting rate of return as the higher the ARR, the more attractive the investment.