Multiple choice

Accounting Rate of Return =

  1. Average Profit after Tax + Average Book Value of Investment

  2. Average Profit after Tax – Average Book Value of Investment
  3. Average Profit after Tax $ \times $ Average Book Value of Investment
  4. Average Profit after Tax $ \div $ Average Book Value of Investment
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D Correct answer
Explanation

Accounting rate of return, also known as the average rate of return, or ARR is a financial ratio used in capital budgeting. ARR calculates the return generated from net income of the proposed capital investment.

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