The Payback Period and the Accounting Rate of Return Are

question 160

Essay

The payback period and the accounting rate of return are two methods of evaluating capital budgeting decisions.Like other approaches, these two methods have advantages and disadvantages.
Required:
a.What is an advantage of these two methods?
b.List two disadvantages of the payback period and explain how to calculate the payback period.
c.List two advantages and two disadvantages of the accounting rate of return and explain how to calculate the return.

---

Definitions:

Repetitive Processes

Operations or tasks that are performed repeatedly in the same manner, often found in manufacturing and production lines.

Large Projects

Extensive or significant undertakings that typically require considerable resources, time, and coordination to complete.

International Organization for Standardization

An independent, non-governmental international organization that develops and publishes a wide range of proprietary, industrial, and commercial standards.

Standard Deviations

A measure of the amount of variation or dispersion of a set of values, indicating how much the values deviate from the mean of the set.