Asked by Madison Katelyn on Jul 14, 2024
Verified
In calculating the accounting rate of return using the straight-line method of depreciation,the annual average investment is calculated as (beginning book value + ending book value)/2.
Accounting Rate
Typically refers to the rate of return or interest rate used in financial calculations, such as net present value or internal rate of return.
Straight-Line Method
A method of calculating depreciation of an asset, which involves evenly spreading the cost of the asset over its useful life.
Annual Average Investment
The average amount invested over a certain period, typically calculated for evaluating investment performance.
- Understand the significance of considering return on investment in capital budgeting decisions.
Verified Answer
DA
Dorothy AntoineJul 20, 2024
Final Answer :
True
Explanation :
This is the correct formula for calculating the annual average investment when using the straight-line method of depreciation.
Learning Objectives
- Understand the significance of considering return on investment in capital budgeting decisions.