If a project does not have constant incremental revenues and expenses over its useful life, the simple rate of return will fluctuate from year to year.

Question

Quizplus · Accepted Answer

Simple rate of return is based on the ratio of average annual incremental net income to initial investment. If there are fluctuations in revenues and expenses, the net income will also vary, thus affecting the simple rate of return.

If a Project Does Not Have Constant Incremental Revenues and Expenses