What is the capital budgeting method that divides a project's annual incremental net income by the initial investment?
A) The internal rate of return method.
B) The simple (or accounting) rate of return method.
C) The payback method.
D) The net present value method.

Question

Quizplus · Accepted Answer

The method described is the simple (or accounting) rate of return method, which is calculated by dividing the project's annual incremental net income by the initial investment. This method does not take into account the time value of money and is less precise than other methods such as the net present value or internal rate of return methods.

What Is the Capital Budgeting Method That Divides a Project's