ARR: Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment. The formula to calculate ARR is as follows: A R R = A v e r a g e A c c o u n t i n g p r o f i t s A v e r a g e I n v e s t m e n t Payback Period: Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project. To choose: The method of evaluation of capital investment proposals that ignore present value

Question

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Answer 1

Question

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

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Answer 2

Question

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

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Answer 3

Question

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

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Answer 4

Question

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

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Answer 5

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

Answer 6

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

Answer 7

Chapter 15, Problem 1SEQ

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The method of evaluation of capital investment proposals that ignore present value

Answer 8

Expert Solution & Answer

Answer to Problem 1SEQ

C. Both A and B

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Explanation for correct answer:

Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence the correct option is C.

Explanation for incorrect answers:

A. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

B. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

D. Both the Average rate of return and Cash Payback methods ignore present value for evaluation of capital investment proposals. Hence this option is incorrect.

Answer 12

Ch. 15 - Prob. 1SEQ Ch. 15 - Management is considering a $100,000 investmentin...Ch. 15 - The expected period of time that will elapse...Ch. 15 - A project that will cost $120,000 is estimated to...Ch. 15 - Prob. 5SEQ Ch. 15 - What are the principal objections to the use 01the...Ch. 15 - Discuss the principal limitations of the cash...Ch. 15 - Prob. 3CDQ Ch. 15 - Prob. 4CDQ Ch. 15 - Prob. 5CDQ

Answer to Problem 1SEQ

Explanation of Solution

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Chapter 15 Solutions