The investment decision rule that relates average net income to average investment is the:
A)discounted cash flow method.
B)average accounting return method.
C)average payback method.
D)average profitability index.
E)None of the above.

Question

Quizplus · Accepted Answer

The investment decision rule that relates average net income to average investment is the average accounting return method. This method calculates the average net income earned by the investment and divides it by the average investment. It is a simple and easy-to-use method for measuring the profitability of an investment. However, it does not take into account the time value of money and does not provide an indication of the expected cash flows over the life of the project.

The Investment Decision Rule That Relates Average Net Income to Average