Question

All of the following are disadvantages of using the average rate of return except a.The average rate of return method does not consider the expected timing of the expected cash flows. b.The average rate of return method does not use present values. c.The average rate of return method does not use the expected cash flows from the proposal. d.All of these choices are disadvantages.

Answer 1

D

Step-by-step explanation:

average rate of return = average net income / average book value

an advantage of average rate of return is that it is easy to calculate.

its disadvantages include :

a.The average rate of return method does not consider the expected timing of the expected cash flows like the NPV and IRR method.

b.The average rate of return method does not use present values.

c.The average rate of return method does not use the expected cash flows from the proposal. it makes use of accounting values instead.