## Accounting rate of return (arr), Financial Management

Assignment Help:

Accounting Rate of Return (ARR):

This technique relies on the rate of return every project will earn over its life. It takes the help of accounting profit while calculating the returns.  There are 2 methods of calculating ARR.

(i)                 On the basis of original investment,

This technique of calculation was rejected on the ground that the original outlay is gradually recovered over the project life because of depreciation charge.

When depreciation is to be taken on a straight-line basis and no salvage value is understood, the average investment is always equal to one-half of the original in- vestment, and the resulting rate of return is always two times the rate determined on the basis of original investment.

#### Determine the return on invested capital, 1.      Consider the following tw...

1.      Consider the following two investment alternatives   Net cash flow   End of year Machine A Machine

#### Case study - danish mortgage bonds, (a) The subsequent is a discussion base...

(a) The subsequent is a discussion based upon IFR Special Report in issue 1239 during the Year 1998. Danish mortgage bonds have extended been domestic investors' referred d

#### Computing hedge ratio: the modified duration method, Let us consider a situ...

Let us consider a situation wherein a position in an interest rate dependent asset such as a bond portfolio or a money market security is hedged by using an interest ra

#### Explanation and definition of the mos, a) i = 800 units, ii = 250 units, ii...

a) i = 800 units, ii = 250 units, iii = 60% b) Explanation and Definition of the MOS. Play-it has the better MOS in absolute terms, although Tread-it has the better MOS when mea

#### Illustrate the operating leverage, Q. Illustrate the Operating Leverage? ...

Q. Illustrate the Operating Leverage? Operating Leverage: - The operating leverage perhaps defined as the tendency of the operating profit to differ disproportional with sales.

#### Empirical measurement of liquidity, Empirical Measurement of Liquidity: Th...

Empirical Measurement of Liquidity: The number of days a particular share is being traded reflects the liquidity of the market. If it is traded actively on 50% of the days when th

#### Evaluate consolidated income statement, The consolidated income statement...

The consolidated income statement for AB Group for the year ended 30 June 2010: (all amounts in the workings are in \$000, unless stated otherwise)

#### Calculate the value of cash flow, a. Consider the time line below that show...

a. Consider the time line below that shows periodic cash flows and interest rates per period. Interest rate/year 0 1 2 3 4 5 6 7 8 9 Time 2,500 -4,000 6,000 -3,700 Cash flows

#### Principle of opportunity cost, Suppose you have recently been contracted as...

Suppose you have recently been contracted as a financial consultant to a London-based engineering company, Alpha Products Plc. The company uses three components as part of their pr

#### Fixed weight aggregates method - fisher''s ideal method, Fixed Weight Aggre...

Fixed Weight Aggregates Method In fixed weight aggregates method, the weights used are neither from base period nor from current period but from a representative period. These