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Answered: Which of the following is not an…
Which of the following is not an advantage of the average rate of return method?
a.includes the amount of income earned over the entire life of the proposal
b.takes into consideration the time value of money
c.emphasizes accounting income
d.easy to use
Average Rate of Return (Definition, Formula) | How to – Explanation. The formula for the calculation of the average return can be obtained by using the following steps: Step 1: Firstly, determine the earnings from an investment, say stock, options, etc., for a significant time, say five years. Now, calculate the average annual return by dividing the summation of the earnings by the no. of years considered.average rate of return method. Which of the following is not an advantage of the average rate of return method? takes into consideration the time value of money. Which of the following is an advantage of the cash payback method? easy to use. The production department is proposing the purchase of an automatic insertion machine. It has identifiedWhich of the following is not an advantage of the average rate of return method? a. It includes the amount of income earned over the entire life of the proposal. b. It emphasizes accounting income. c. It is easy to use. d. It takes into consideration the time value of money.
Best RAT #11 Chapter 25 Flashcards | Quizlet – The main disadvantage of average rate of return method (accounting rate of return method) is that it does not directly consider the expected cash flows from the proposal and the timing of the cash flows. The cash flows and its timing is very important because cash coming from investment can be reinvested in other income generating activities.Question: Which Of The Following Is Not An Advantage Of The Average Rate Of Return Method? A. It Includes The Amount Of Income Earned Over The Entire Life Of The Proposal. B. It Emphasizes Accounting Income. C. It Is Easy To Use. D.A project costs £29,000 and is expected to have a useful life of three years at which point its scrap value will be £5,000. The project is expected to yield net profits of £1,000 per annum over its useful life. Using the average book value of the asset the accounting rate of return will be:
Which of the following is not an advantage of the average – All of the following are advantages of using the average rate of return method except it emphasizes accounting income, which is often used by investors and creditors in evaluating management performance.Solution for Which of the following is not an advantage of the average rate of return method? a.includes the amount of income earned over the entire life of…Advantages: Accounting rate of return is simple and straightforward to compute. It focuses on accounting net operating income. Creditors and investors use accounting net operating income to evaluate the performance of management. Disadvantages: Accounting rate of return method does not take into account the time value of money.
NPV and IRR in Excel 2010 – .
How to annualise a return – If you're an investor you compare the return on your investments all the time but you have to do it in a standardized way and we annualize returns for that reason.
Unfortunately it's not linear. In other words if you invest one percent for 12 months you end up with more than twelve percent at the end because you've been reinvesting the amount as you go along so if you want to convert daily, weekly, monthly returns into annual returns we'll show you how to do that now very simply and very practically so here we go. Let's start with a really simple example: what total interest would you receive if you get point [zero] one percent per day for a whole year. But remember this is compound interest so we can't just do the following: 0.1% per day x 365 days a year which would give a total interest of 36.5%. Let's see why that doesn't work for compound interest. Let's start on day one with a hundred pounds we receive point one percent interest on that hundred pounds which is ten pence, on the second day we receive point one percent interest on that hundred pounds and ten pence but that doesn't give us a hundred pounds and twenty pence. If you see there are two digits in red on the right-hand side we get an extra hundredth of a penny because we also receive point one percent interest on the 10 pence interest from the day before. So let's follow this day by day on the first day you ten pence, on the second day we receive 20 pence plus that extra point 01 pence. On day three we have 30 pence plus point zero three pence because of the compounding. On day four we have an extra point zero six pence. After 31 days we're really starting to see the benefit of compound interest. We've got an extra four point seven pence compared to just simple interest and after a year we end up with a hundred and forty-four pounds if it was simple interest just we'd have just received thirty six pounds fifty and the difference of seven pounds and fifty two pence is due to the compounding and the interest we've received as a percentage is 44.03 percent. So here it is as an equation we added one to the daily rate and we raised it to the power 365 and that's because there are 365 days in a year. To convert weekly and monthly rates the process is almost exactly the same but instead of raising to the power 365, to annualize a weekly return we'd raise it to the power 52 which is the number of weeks in a year and to convert a monthly rate we'd raise to the power 12 because there are 12 months in a year. Let's work through the example on a calculator. We take one, we had point zero zero one because it's 0.1% and then you have to find this button which is the exponent. The symbol's different on different calculators here it's "x^y" on some calculators the "y" just a kind of square for example on Casio calculators. So we raise that to the power 365 and we get 1.44, we subtract one and we multiply by a hundred to convert it into a percentage and we come up with forty four percent as before and then finally here's how we do it in a spreadsheet. So we put our annual- ization equation into cell E3: equals then we put our parentheses 1 plus the daily rate in cell B3 and we raise that to the power of the number of days in the year which is in cell D3 and finally we subtract one and there's our forty four point zero three percent again. If we were to do it for weekly, the weekly periods per year is 52 and for monthly is 12 and I just copy the equation down, and there are our results. If you want a bit more detail on the maths just take a look at pensioncraft.com and our associated blog article. What other calculations do you find tricky? We'd love to know. Tweet us @PensionCraft message us on Facebook and if you want to see more of these videos subscribe to our Channel .
Diminishing Returns and the Production Function- Micro Topic 3.1 – .