Concept Introduction:
ARR:
Accounting
The formula to calculate ARR is as follows:
Hence, higher the ARR better it is. A project with the Higher ARR is chosen first in the capital rationing process.
IRR:
To Indicate:
The difference between the Average rate or return and internal rate of return
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Chapter 15 Solutions
Survey of Accounting (Accounting I)
- Which provides a better estimate of a project’s “true” rate of return, the MIRR or theregular IRR? Explain.arrow_forwardHow does the expected rate of return concept differ from that of the realized rate of return?arrow_forwardHow does the size of the initial investment affect the internal rate of return on the net present value models?arrow_forward
- What type of projects does the Payback method favor?arrow_forwardWhen is a project is said to be a net investment?arrow_forwardWhy are NPV, BCR, and IRR considered SUPERIOR indicators of Project Feasibility compared to Payback or Recoupment Period and Accounting Rates of Return? Explain briefly.arrow_forward
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