Essays on accounting rate of return (arr)

Some of the investment appraisal techniques used range from Net Present Value (NPV), accounting rate of return (ARR), Internal Rate of Return (ARR) and Payback Period.... Calculations are done using the discount rate of the cost of capital that is determined depending on considerations of the future projected risk of the project (Hastings, 2009)....

Business AssignmentTable of ContentsIntroduction3Alternative Methods of Investment Appraisal3Accounting rate of return (ARR)4Net Present Value (NPV)6Internal Rate of Return7Risk and Uncertainty8Conclusion10... The paper "Alternative Methods of Investment Appraisal" is an inspiring example of a case study on finance and accounting.... The paper "Alternative Methods of Investment Appraisal" is an inspiring example of a case study on finance and accounting....

Report on the financial viability of this project using arr and NPV.... Management information system is used in operation function to ensure that there is efficiency and proper flow of information during organisation operations.... For example, management information system is used in designing products, scheduling of task, quality control and provide....

breakeven analysis, the estimated profit, and capital budgeting analysis based on the computed payback period, accounting rate of return, net present value, and the internal rate of return). ... accounting rate of return (ARR) ……… 12 ... ppendix IV – Computation of accounting rate of return …………………….... breakeven analysis, the estimated profit, and capital budgeting analysis based on the computed payback period, accounting rate of return, net present value, and the internal rate of return)....

Furthermore, the report justifies the technique that has been used in order to evaluate the project by comparing it with other project evaluation techniques such as accounting rate of return and Profitability Index.... NPV and accounting rate of return accounting rate of return (ARR) is the average return that the project would yield throughout its time period (Gitman, 2003).... 4% It is better to use NPV than accounting rate of return (ARR) as the NPV discounts the future cash flows whereas the ARR does not consider the time value of money....

d) The accounting rate of return (ARR) for each project.... c) The internal rate of return (IRR) for each project.... nternal rate of return (IRR) is defined as the rate of interest that equates I with the PV of future cash inflows.... ccounting rate of return (ARR) measures profitability from the conventional accounting standpoint by relating the required investment-or sometimes the average investment-to the future annual net income....

(Anderson, et al 2001) The commonly used methods of appraisal include accounting rate of return (ARR), payback period (PP), internal rate of return (IRR) and the net present value (NPV).... ccounting rate of return (ARR) ... he Internal rate of return (IRR) ... This means that a lot has to be done so as to improve the production rate of region two.... This will enable her to see the distribution rate of sale over months and thus making annual analysis easier....

The accounting rate of return is therefore of limited application as far as using the same as criteria in evaluating investments as it does take into consideration the time value of money.... The tools that could be used for investment appraisal or capital budgeting techniques available include the net present value (NPV) method and internal rate of return (IRR), payback method (PB) and the accounting rate of return (ARR) method.... For the purpose of this paper, the non-discounting methods include the accounting rate of return (ARR) and payback method (PB)....

?? accounting rate of return(ARR), ... nowing the rationale behind each of the following investment appraisal methods, namely: payback method, accounting rate of return (ARR), net present value (NPV) and internal rate of return (IRR) requires one to relate the same with the cost of capital as discussed earlier.... accounting rate of return (ARR) is the other method for non discounted cash flow.... ARR is also known as accrual accounting rate of return, unadjusted rate of return model and the book value model....

Understanding Management accounting and Financial Management January 17, Part A Production Solutions Ltd Cash Budget October November December January February ?... The benefits to be gained from budgeting are numerous and are available to all companies inclusive of Production Solutions Ltd....

accounting rate of return (ARR) is computed as a percentage of average annual profits to the average investment in the project.... he formula to calculate (ARR) accounting rate of return: ... verage rate of return ... nternal rate of return (IRR) (Samuels, et al, 2000) ... ccounting rate of return (ARR): ... nternal rate of return (IRR): ... nternal rate of return (IRR) is defined as the rate of discount that has to be applied on a project's cash flows to make the Net Present Value (NPV) equal to zero....

Return on Capital Employed (ROCE)Probability IndexPay back MethodNet Present value (NPV)Capital Rationing Internal rate of return (IRR)Return on Capital Employed (ROCE): This is also known as accounting rate of return (ARR).... nternal rate of return (IRR): IRR represent the discount rate at which NPV of an investment is Zero.... ost of Capital valuation: The cost of capital is the rate of return that the enterprise must pay to satisfy the providers of funds, and if reflect the riskiness of providing funds....

The validity of the comparisons can be further enforced by using other methods of investment appraisals in conjunction with the accounting rate of return (Watson & Head, 2004).... onsidering other methods along with the accounting rate of return (ARR) system, it can be seen that ARR is much simpler and quite straight forwards.... That is to say, by deducting depreciation values from the annual cash flow and dividing the remaining balance by the initial investment to get the value which is taken to be the accounting rate of return (Arnold, 2002). ...

ccounting Rate of Return: The accounting rate of return (ARR) takes into account the accounting income of the company and not the cash flows generated.... he accounting rate of return on the proposed project = £110,800 / £200,000 = 55.... trengths: The accounting rate of return (ARR) takes into account average accounting profits and average investment on a project and gives the result in the form of a percentage.... ccounting rate of return (ARR) ...

ccounting rate of return (ARR) 9 ... nternal rate of return 10 ... ccounting rate of return (ARR) ... nternal rate of return ... dvantage of IRR: The method is widely accepted for quantifying the rate of return of a particular project after considering the discounted cash flows (Jiambalv, 2010).... dvantage of arr: It measures the profitability of the business by using the accounting tools.... isadvantage of arr: arr does not take in to consideration the time value of money and thus it is the main disadvantage of the method (Chandra, 2005; Weygandt, Kimmel and Kieso, 2010)....

There are 5 techniques that have been employed in this particular scenario: simple payback method; accounting rate of return (ARR); net present value (NPV); and internal rate of return (IRR) (Mott, 1997).... ii) accounting rate of return While the payback period method concentrates on cash flows, the ARR concentrates on profit.... Capital Investment Appraisal Capital investment appraisal is the evaluation of the attractiveness and viability of an investment proposal, using techniques like payback period; net present value (NPV); average rate of return (ARR); or internal rate of return (IRR) (Go?...

accounting rate of return is one of the simplest techniques for evaluating investments, though not widely applied.... An internal rate of return also known as the discounted cash flow rate of return offers a means to financial analysts to quantify the rates of return an investment is envisioned to bring if implemented.... It is calculated NPV =∑_(n=0)^N▒Cn/〖(1+r)〗^n = 0 Which is equivalent to NPV/(1+IRR)^year) of all positive and negative cash flows While evaluating investments using IRR any project which has an internal rate of return greater than the opportunity cost of a project usually taken to be a weighted average cost of capital-WACC are accepted....

nternal rate of return (IRR) ... nternal rate of return is another way through which a company can use to evaluate the viability of the investment.... The project with the highest internal rate of return should be picked first. ... ccounting rate of return (ARR) ... he valuation of the project using the PV value gives an investor opportunity to evaluate among the available investment opportunities the one with the highest return....

The cash flow during year 3 is £ 60,000.... Therefore calculation will be: ... ... he table above is showing present value of estimated.... ... ... flows at different rates while it is clear that present value of estimate cash flows at 29 percent and 30 percent are respectively nearest greater and less to initial investment therefore the IRR will lie between 30% and 29%....

The four investment appraisal method could include the following, the payback, the accounting rate of return (ARR) and the NPV.... Another method is the accounting rate of return (ARR) which can be computed by dividing the average net cash inflow by the initial investment.... After evaluation that the NPV was most applicable method, option 1 came out as better option using an assumed discount rate of 10% for both options.... It was problematic to apply arr because cash outlays happened over the seven-year period and not only initially....

Danielson & Press (2003) highlight that there exists a relation between the economic and the accounting rate of return.... he NPV method of project evaluation solves the limitations of the payback period and accounting rate of return.... Unlike the accounting rate of return which considers the net earnings, the net present value method considers the project cash flows.... ccounting rate of return (ARR)- 6 ... Internal rate of return (IRR)- 7 ...

This can be done with the help of various techniques like Net Present value (NPV), Internal rate of return (IRR), Payback method and accounting rate of return (ARR).... ccounting rate of return (ARR) - This method states the investment profits as a percentage of the invested capital.... nternal rate of return (IRR) - IRR is the discount rate at which the present value of the cumulative cash inflows is the same as the amount invested in the project....

he above mentioned investment analysis and capital budgeting techniques focused on the cash flows of the projects but the accounting rate of return calculation is based on using expected operating income that will be generated from the project.... The formula for using accounting rate of return (ARR) is; ... f the accounting rate of return (ARR) is equal to or greater than management's required rate of return then the project is accepted and if ARR is less than required rate of return then the project is rejected (Megginson & Smart, 2008). ...

CORPORATE FINANCIAL MANAGEMENT a) Evaluate the plans using four alternative capital budgeting techniques (paybackperiod, accounting rate of return, IRR and NPV assuming a discount rate of 10% and 35% alternatively), rank the plans accordingly and critically discuss the results and the applied methodology.... On the other hand, the after tax accounting profits are needed to determine the accounting rate of return (ARR).... he accounting rate of return (ARR) capital budgeting technique ...

ii) accounting rate of return (ARR) ... i) accounting rate of return (ARR) ... Economic profitability and the accounting rate of return.... Although the calculation of NPV discounts future cash flows using required rate of return, it fails to reveal the actual return of the project and this limits its usability.... v) Internal rate of return (IRR) ... Payback Period and Internal rate of return in Real Options Analysis....

These techniques include payback period, accounting rate of return (ARR), net present values (NPV) and internal rate of return (IRR).... he accounting rate of return is “an unsophisticated technique of project appraisal (Gitman, 1997).... ccounting rate of return (ARR) ... nternal rate of return (IRR) ... ??The internal rate of return (IRR) is a widely used tool for evaluating deterministic cash flow streams … When used appropriately, it can be a valuable aid in project acceptance and selection” (Hazen, 2003)....

Also Payback method and accounting rate of return (ARR) which make no adjustment for the time value of money are often considered.... The major objective is to explore why Discounted Cash flow (DCF) analysis in particular is a preferred method to evaluate investment in financial terms in comparison to other methods such as Payback method and accounting rate of return (ARR) which make no adjustment for the time value of money.... However, the DCF method considers the time value of money which is reduced progressively and it consists of Net Present Value (NPV) approach and Internal rate of return (IRR) methods....

The four major techniques used for evaluating investment in capital projects include: accounting rate of return (ARR), Payback period technique, net present value (NPV) technique, and internal rate of return (IRR) (Gotze, et al.... Whereas the last three techniques focus on cash flow, the first technique (the accounting rate of return (ARR) also called return on investment (ROI) uses accounting profit during its appraisal calculation, offering a view of the general profitability of the investment project....

Some of the techniques that have been used in order to analyse the investment decisions are: Net Present Value (NPV), Internal Rate of Return (IRR), accounting rate of return (ARR), and Economic Value Analysis (SVA).... One of the first techniques that have been used to analyse the investment is the accounting rate of return (ARR) which is the average return the company has earned over the period of time.... Internal rate of return is the other technique that has been used and this technique presents the interest rate where the future cash flows after being discounted will have a value of 0 (Gitman, 2003)....

The paper 'Managing Financial Resources' concerns planning for capital assets, the concept of variance analysis, material cost variance, costing and pricing decisions, sensitivity analysis, investment appraisal, evaluation of payback period, accounting rate of return, discounted cash flow etc.... For the purpose of taking the better decision, the fundamental project evaluation techniques like Pay back period, ARR (Accounting or Average rate of return), NPV (Net Present Value), or IRR (Internal rate of return) is applicable....

The accounting rate of return and Payback method don't offer a time value of money.... The accounting rate of return method is easy to calculate, once the profit is known.... Discuss the relationship between the Net Present Value (NPV), Internal Rate of Return (IRR), accounting rate of return (ARR) and Payback Method as methods of project appraisal.... The accounting rate of return and Payback method do not offer a time value of money....

ased on these discussions, Investment Appraisal can therefore be defined as; “Evaluation of the attractiveness of an investment proposal, using methods such as average rate of return, internal rate of return (IRR), net present value (NPV), or payback period.... ccounting rate of return (ARR) ... nternal rate of return (IRR) ... Discounted cash flows techniques include Payback period and internal rate of return (Solution Matrix, 2008)....

accounting rate of return (ARR); and IV.... accounting rate of return (ARR) The accounting rate of return is not considered to be as sophisticated as some other capital budgeting techniques (Gitman 1997).... Internal rate of return (IRR) III.... Internal rate of return (IRR) The internal rate of return (IRR) is a widely used tool for evaluating cash flow streams.... Some of the problems associated with the use of IRR is the possibility of conflicting multiple rates of return or in some cases no internal rate at all....

The paper outlines calculations for the payback period, accounting rate of return, and net present value on this investment, etc.... 15% is a better rate of 1.... It is a need to deposit automatically on returned checks though asking  the bank for return Item box service for re-depositing the check and charge back the bank    Instruct your bank to automatically deposit "returned checks.... Ask your bank if they offer return Item box service....

These techniques include payback period, accounting rate of return (ARR), net present values (NPV) and internal rate of return (IRR).... accounting rate of return (ARR) The accounting rate of return is “an unsophisticated technique of project appraisal (Gitman, 1997).... Internal rate of return (IRR) “The internal rate of return (IRR) is a widely used tool for evaluating deterministic cash flow streams … When used appropriately, it can be a valuable aid in project acceptance and selection” (Hazen, 2003)....

The financial viability can be envisaged using four types of investment appraisal techniques such as 1) Net Present Value (NPV) 2) Internal Rate of Return (IRR) 3) accounting rate of return, and 4) Payback Period (PP).... Therefore, on the basis of ARR, it is suggested to the management of the company that “onshore” project is more feasible as it may provide 5% extra accounting rate of return as compared to the “offshore” project.... nternal rate of return (IRR) ...

Pampers Health Spa in this situation would be advised to invest in the second proposal as it has a higher accounting rate of return percentage. ... The first two methods payback period and accounting rate of return are not particularly appropriate methods of valuing and assessing proposals.... As for accounting rate of return, it is relying on values that comprise of non-cash items. ... ccounting rate of return ... ccounting rate of return ...

The government comes in to set price controls in order to make the goods affordable to low income earners enable the manufacturers get the right return on their investment.... Long-Term Decisions Name: Instructor: Task: Date: Long-Term Decisions The government plays major role through its intervention in the market system....

The second strategy is accounting rate of return, ARR.... Furthermore, not at all like NPV, the accounting rate of return overlooks the income from the venture (Chandra, 2011: 245).... At last, it is expected that all the money streams that are produced by the venture task ought to be promptly reinvested at a particular rate of return equivalent to the undertaking's rebate rate (Megginson and Smart, 2009: 197).... Bookkeeping rate of return alludes to a money related proportion utilized as a part of the capital planning as it demonstrates the productivity of the task by giving the arrival of the venture (Bhat, 2008: 128)....

accounting rate of return (ARR).... the difference between the highest possible rate of return and the lowest possible rate of return is one measure, but the range is based on only two extreme values.... The variance of an asset's rate of return can be found as the sum of the squared deviation of each possible rate of return from the expected rate of return multiplied by the probability that the rate of return occurs. ...

usiness dictionary defines capital investment appraisal as “An evaluation of the attractiveness of an investment proposal, using methods such as average rate of return, internal rate of return (IRR), net present value (NPV), or payback period.... ?? Net Present Value (NPV), Internal rate of return (IRR), Accounting/Average rate of return (ARR) Payback Period and Profitability Index are important techniques for investment appraisal but for international investment foreign decisions all the figures must be converted to domestic currency before applying any of the investment appraisal techniques....

dvantages of accounting rate of return (ARR) ... isadvantages of accounting rate of return (ARR) ... 2 IRR (Internal rate of return) ... It is also referred to as internal rate of return because it depends fully on the outlay of investment and proceeds that are associated with the project and not any rate that is determined outside the venture. ... PBP method ignores inflows after PBP and as such, it does not accommodate the element of return to an investment. ...

Fluctuations in the exchange rate of domestic currency and the foreign currency, in which the organization is trading, can raise serious implications for internationally trading businesses.... While, on the other hand, a large firm will be able to minimize negative impact of exchange rate exposure because it is trading on with various countries at a time and fluctuation in the exchange rate of just one country may not impact is forcefully.... Relative rates of inflation: country that comparatively faces a higher rate of inflation than the other country will soon experience a depreciation of its currency against the other country's currency....

The main techniques discussed for understanding the same are, Net present Value Internal Rate of return Pay back period accounting rate of return Net present Value: The net present value is also known as the discounted cash flow method, “It is an application of a fundamental concept in economics and finance called the Time Value of Money, which, in turn, utilizes the arithmetic of compound interest in reverse.... There are better alternatives which are not significantly more difficult to calculate” (accounting rate of return (ARR) 2005)....

alculation of accounting rate of return ... dvantages and disadvantages of accounting rate of return ... ?        Calculation of accounting rate of return (ARR): ... Since the accounting rate of return, Payback period, Net present value, Profitability index and internal rate of Project A is higher as compared to Project B, the former is to be recommended for acceptance. ... alculation of Internal rate of return ...

On the other hand, the non-discounted cash flow techniques consist of Payback Period, Urgency and accounting rate of return (ARR).... The relative discounted cash flow techniques may have various forms in which the famous ones are Internal rate of return (IRR) and Profitability Index (PI).... Internal rate of return This discounted cash flow technique is also quite popular among the financial analyst such that it works on the basis of NPV.... Internal rate of return is that rate at which the Net Present Value of a project becomes zero....

Another method that is expressed in rates from which it could be compared is the accounting rate of return (ARR) but since the latter does not consider time value of money1, IRR then occupies a higher ground as that of the NPV.... This paper "The Value of Internal rate of return" discusses IRR as a useful measure of investments if treated with caution may, in fact, be appreciated, given that its wide acceptance in practice.... The value of Internal rate of return (IRR) as a useful measure of investments if treated with caution may in fact be appreciated, given that its wide acceptance in practice....

They include the simple payback, the internal rate of return (IRR) and the accounting rate of return. ... he accounting rate of return (ARR) employs a number of formulas in its calculation.... ccounting rate of return ... nternal rate of return ... righam and Ehrhardt (2005) indicate that the internal rate of return (IRR) equates the present value of a project's expected cash flows to the present value of its projected cost....

The three main investment appraisal techniques are payback method, accounting rate of return method and the net present value method(Rohrch,2007).... According to the accounting rate of return method, a project appraisal involves estimating the accounting rate of return that a project should yield.... The accounting rate of return (ARR) expresses the average accounting profit as a percentage of the capital outlay.... If it exceeds a target rate of return then the project is acceptable....

he next method is the accounting rate of return (ARR) method.... or considering this proposal the management can use the investment appraisal techniques which can be segregated into two groups, first group comprising of traditional methods such as payback period method and average rate of return method and second group comprising of time adjusted methods/ discounted cash flow(DCF) methods such as net present value method, internal rate of return method, net terminal value method and profitability index method....