Which One of the Following Statements Is Correct Concerning the Average

question 221

Multiple Choice

Which one of the following statements is correct concerning the average accounting return (AAR) ?

• A) The average book value used in the AAR formula will always equal one-half of the initial investment as long as straight-line depreciation over the life of the project is used.
• B) The average net income is the same as the total cash flows from the project minus the initial cash outflow to start the project.
• C) The AAR is similar to the profitability index in that both are based on accounting values rather than financial cash flows.
• D) Under the AAR rule, a project should be accepted if the targeted AAR is greater than the project's AAR.
• E) The AAR is a true financial rate of return, which is relatively easy to compute.

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Definitions:

Single-Factor ANOVA

A statistical technique used to compare the means of three or more samples using variance analysis on a single independent variable.

Test Statistic

A calculated value used in statistical hypothesis testing to determine whether to reject the null hypothesis.

Squares

In statistics, refers to the process of squaring each difference between individual data points and the mean, used in the calculation of variance and standard deviation.

One-Way ANOVA

A statistical test that compares the means of three or more independent groups to determine if there is a statistically significant difference between them, based on one independent variable.