Evaluate the applicability of the ARR method in investment decision-making.

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Understand the Problem

The question is asking us to evaluate the applicability of the ARR (Average Rate of Return) method in the context of investment decision-making, specifically regarding its suitability for different types of investments.

Answer

ARR is most suitable for short-term investments.

ARR is most suitable for short-term investments.

Answer for screen readers

ARR is most suitable for short-term investments.

More Information

ARR does not account for the time value of money, making it less suitable for long-term projects but useful for easier assessments in short-term investments.

Tips

A common mistake is to overlook the impact of ignoring the time value of money, leading to incorrect evaluation in long-term projects.

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