The Average Accounting Return

Multiple Choice

The average accounting return:

A) Reflects the projected net effect of the cash flows from a project on the overall firm.
B) Is comparable to the return on assets and thus provides a similar measure of performance.
C) Reflects the anticipated net impact of a project on the shareholders of the firm.
D) Rule, when applied, guarantees that only projects that increase shareholder wealth will be accepted.
E) Ignores all income produced by a project after an arbitrarily assigned cutoff point.