Asked by Bethany Allen on May 22, 2024
Verified
The annual rate of return technique requires dividing a project's annual cash inflows by the economic life of the project.
Annual Rate of Return Technique
A method of evaluating investments by calculating the expected annual rate of profit or loss.
Annual Cash Inflows
The total amount of money received by a company or individual within a year from various sources.
Economic Life
Economic life is the estimated period over which an asset is expected to be useful to the owner for the purpose of generating income or other economic benefits.
- Comprehend the methodology for calculating annual rate of return for investment projects.
Verified Answer
TB
Terrence BrownMay 24, 2024
Final Answer :
False
Explanation :
The annual rate of return technique typically involves dividing the average annual profit (or cash inflow) by the initial investment cost, not by the economic life of the project.
Learning Objectives
- Comprehend the methodology for calculating annual rate of return for investment projects.