The method of evaluating long-term investment decisions that involves dividing the average earnings from the investment by the amount of the investment is called the
A) Payback method
B) Internal rate of return method
C) Accounting rate of return method
D) Net present value method

Question

Quizplus · Accepted Answer

The method described in the question is the Accounting rate of return method. The other methods listed are the Payback method, Internal rate of return method, and Net present value method, which use different calculations to evaluate long-term investment decisions. However, the question specifically describes the calculation of average earnings divided by the amount of the investment, which is the calculation used in the Accounting rate of return method.

The Method of Evaluating Long-Term Investment Decisions That Involves Dividing