Average Rate of Return Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return. Calculation of Average rate of return: Average Rate of Return } = ( Estimated Average Annual Income ) ( Average Investment ) × 100 Internal rate of return method Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return. To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

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Answer 1

Question

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

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Answer 2

Question

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

Expert Solution & Answer

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Answer 3

Question

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

Expert Solution & Answer

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Answer 4

Question

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

Expert Solution & Answer

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Answer 5

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

Answer 6

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

Answer 7

Chapter 26, Problem 3DQ

To determine

Average Rate of Return

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$Average Rate of Return } = (Estimated Average Annual Income)(Average Investment)× 100$

Internal rate of return method

Internal rate of return method is one of the capital investment methods which determine the rate of return, wherein the net present value of all the cash flows (both positive and negative) from an investment is zero. This method is also called as the time-adjusted rate of return method. It used to evaluate the different proposal’s expected rate of return.

To determine: The reasons for the difference between the average rate of return and the internal rate of return on the same project.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 26 - What are the principal objections to the use of...Ch. 26 - Discuss the principal limitations of the cash...Ch. 26 - Prob. 3DQ Ch. 26 - Your boss has suggested that a one-year payback...Ch. 26 - Prob. 5DQ Ch. 26 - Prob. 6DQ Ch. 26 - A net present value analysis used to evaluate a...Ch. 26 - Two projects haw an identical net present value of...Ch. 26 - Prob. 9DQ Ch. 26 - What are the major disadvantages of the use of the...

Solution Summary: The author explains the difference between the average rate of return and the internal rate on the same project.

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Chapter 26 Solutions