Answer to Question #206328 in Management for Prince

Question

SUBJECT : PROJECT PLANNING AND CONTROL

1. Discuss the usage and application of Average Rate of Return or Accounting Rate of Return Method of capital Budgeting ? (please give at least 2 points for each usage and application )

Answer 1

Average rate of return is used in making budgeting decisions.

It is also used in comparing the average annual profit of an investment as compared to the initial cost of the investment .

In the context for application, average rate of return is applied in organizations to compare profitability of different choices in order to choose the most profitable investment