Of the following capital budgeting decision criteria, which does NOT use discounted cash flows?
A) net present value
B) internal rate of return
C) accounting rate of return
D) All of these techniques typically use discounted cash flows.

Question

Quizplus · Accepted Answer

The accounting rate of return (ARR) does not use discounted cash flows but instead compares the average annual profit of a project to the initial investment. The other capital budgeting decision criteria, such as net present value and internal rate of return, use discounted cash flows to account for the time value of money.

Of the Following Capital Budgeting Decision Criteria, Which Does NOT