ch21 - 21-7The accrual accounting rate-of-return (AARR)...

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Unformatted text preview: 21-7The accrual accounting rate-of-return (AARR) method divides an accrual accounting measure of average annual income of a project by an accrual accounting measure of investment. The strengths of the accrual accounting rate of return method are that it is simple, easy to understand, and considers profitability. Its weaknesses are that it ignores the time value of money and does not consider the cash flows for a project.21-18(30 min.) Capital budgeting methods, no income taxes.The table for the present value of annuities (Appendix B, Table 4) shows: 10 periods at 14% = 5.2161a.Net present value= $28,000 (5.216) $110,000= $146,048 $110,000 = $36,048b.Payback period= 000,28$000,110$= 3.93 yearsc.Internal rate of return:$110,000=Present value of annuity of $28,000 at R% for 10 years, or what factor (F) in the table of present values of an annuity (Appendix B, Table 4) will satisfy the following equation....
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This note was uploaded on 02/23/2010 for the course ACCT 42312 taught by Professor Huh during the Fall '09 term at CSU San Bernardino.

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ch21 - 21-7The accrual accounting rate-of-return (AARR)...

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