Return on Average Investment Vs.discounting Cash Flows

question 22

Essay

Return on average investment vs.discounting cash flows
The computation of return on average investment ignores one characteristic of the earnings stream,which is considered in discounting cash flows.What is this characteristic? Why is it important?

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Definitions:

Property Taxes

Taxes levied by local governments based on the assessed value of real estate property owned by individuals or businesses.

Fixed Cost

A cost that does not change with an increase or decrease in the quantity of goods or services produced or sold.

Accounting Salaries

The wages or salaries paid to employees working in the accounting department, reflecting the cost associated with managing financial records and reports.

Fixed Cost

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance premiums.