[amp_mcq option1=”Benefit cost ratio” option2=”Net present value” option3=”Internal rate of return” option4=”Accounting Rate of Return” correct=”option4″]
The correct answer is D. Accounting Rate of Return (ARR).
Benefit-cost ratio (BCR) is a measure of the efficiency or profitability of a project, and it is calculated by dividing the total benefits of a project by the total costs of the project.
Net present value (NPV) is a measure of the profitability of a project, and it is calculated by taking the present value of all the future cash flows of a project and subtracting the initial investment.
Internal rate of return (IRR) is the rate of return that makes the net present value of a project equal to zero.
Accounting rate of return (ARR) is a measure of the profitability of a project, and it is calculated by dividing the average annual net income of a project by the initial investment.
ARR does not consider the time value of money because it uses the average annual net income of a project, rather than the present value of all the future cash flows of a project. This means that ARR can be misleading, especially for projects with long-term cash flows.