A Strength of the Average Accounting Return (AAR) Method of Project

question 99

Multiple Choice

A strength of the average accounting return (AAR) method of project analysis is the fact that AAR: 

• A) ignores the issue of taxes. 
• B) uses a cutoff rate. 
• C) considers the time value of money. 
• D) is easy to calculate. 
• E) is based on accounting values. 

---

Definitions:

Amortized

The process of gradually paying off a debt or reducing the value of an intangible asset through regular payments over a set period.

Patent

A government-granted exclusive right for an invention, giving the patent owner the right to exclude others from making, using, or selling the invention for a certain period.

Net Income

Net income is the total earnings of a company after subtracting all expenses, taxes, and losses, indicating the company's profitability during a specific time period.

Fair Value

The amount it would take to sell an asset or transfer a liability in a regulated deal between parties in the market at the time of evaluation.