The primary advantages of the average rate of return method are its ease of computation and the fact that

A) it is especially useful to managers whose primary concern is liquidity
B) there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short term
C) it emphasizes the amount of income earned over the life of the proposal
D) rankings of proposals are necessary

Question

Noura Nakdoe · Accepted Answer

Final Answer : C, Explanation :  The average rate of return method emphasizes the amount of income earned over the life of the proposal, making it a useful tool for evaluating long-term investment projects. Additionally, it is relatively easy to calculate. Option A is incorrect because the average rate of return method is focused on profitability, not liquidity. Option B is incorrect because the average rate of return method is not immune to risk from changes in economic conditions or obsolescence. Option D is incorrect because rankings of proposals are not necessarily required for this method.

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