Introduction to Average Rate of Return in Investment Appraisal

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University
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5 questions
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1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is the primary reason for using the average rate of return in investment appraisal?
It considers the riskiness of investments.
It offers a simple percentage for easy comparison.
It calculates the exact future value of investments.
It provides a detailed cash flow analysis.
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
How is the average annual return calculated in the context of investment projects?
By multiplying the total net return by the number of years.
By dividing the total net return by the initial outlay.
By adding the total net return to the initial outlay.
By dividing the total net return by the number of years.
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
In the example provided, which project had the highest average rate of return?
Project A
Projects B and C
Project B
Project C
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a significant limitation of the average rate of return method?
It always overestimates returns.
It is difficult to calculate.
It does not consider the timing of cash flows.
It requires complex financial software.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Why is it important to challenge assumptions when using average rate of return?
Because it always predicts higher returns.
Because assumptions may not be as optimistic as expected.
Because it ignores the initial outlay.
Because it guarantees a fixed return.
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