Which method does not consider time value of money?
Answers
Answer:
the payback method is one of the techniques used in capital budgeting that does not consider the time value of money. the payback method simply computes the number of years it will take for an investment to return cash equal to the amount invested.
Answer:
Average rate of return does not consider time value of money.
Explanation:
The average rate of return is considered a simplified method because it does not use the time value of money when assessing a fixed investment.
The Accounting (Average) Rate of Return (ARR) method calculates the rate of return generated from the expected average net income for each year in which the proposed capital investment is expected to be used in the business.
What is Average rate of return?
Average rate of return is the average annual cash flow generated over the entire duration of an investment. This rate is calculated by aggregating all expected cash flows and dividing by the number of years expected to continue the investment.
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