Question

The primary advantages of the average rate of return method are its ease of computation and the fact thata.it emphasizes the amount of income earned over the life of the proposalb.rankings of proposals are necessaryc.there is less possibility of loss from changes in economic conditions and obsolescence when the commitment is short termd.it is especially useful to managers whose primary concern is liquidity

Answer 1

Answer: A.

it emphasizes the amount of income earned over the life of the proposal.

Explanation:

The primary advantages of the average rate of return method are its ease of computation and the fact that it emphasizes the amount of income earned over the life of the proposal.

The average rate of return method allows for a simple comparison between different types of investments. Since it results in a single percentage, investors can an investment's returns if produces its average rate of return in the future.

The average rate of return is the average annual amount of cash flow generated over the life of an investment. This rate is calculated by aggregating all expected cash flows and dividing by the number of years that the investment is expected to last.