The Payback Period and the Accounting Rate of Return Ignore

question 85

Essay

The payback period and the accounting rate of return ignore 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.

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Definitions:

Atmospheric Effect

A technique in art, especially painting, where color and tone are used to depict the effect of atmosphere on objects in the distance, enhancing depth and realism.

Quatrefoil

A shape or plan in which the parts assume the form of a cloverleaf.

Classical Reference

Allusions to or inspirations from the cultures, literatures, or philosophies of ancient Greece and Rome, often seen in art, literature, and architecture.

Elongated S Curve

A stylistic figure used in art and architecture characterized by an exaggerated S-shaped line or form, conveying sense of movement and grace.