Asked by Deandra Kirkland on Apr 24, 2024
Verified
A major advantage of the annual rate of return technique is that it considers the time value of money.
Annual Rate of Return Technique
A method to estimate the profitability of potential investments by calculating the projected annual rate of return.
Time Value of Money
The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.
- Grasp the significance of the time value of money in financial decision-making.
Verified Answer
PS
Parminder Sandhu7 days ago
Final Answer :
False
Explanation :
The annual rate of return technique does not consider the time value of money; it simply calculates the average annual profit as a percentage of the investment, without discounting future cash flows.
Learning Objectives
- Grasp the significance of the time value of money in financial decision-making.