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31 January, 16:45

The average accounting return (AAR) rule can be best stated as: An investment is acceptable if its AAR is less than a target AAR. An investment is acceptable if its AAR exceeds a target AAR. An investment is acceptable if its AAR exceeds the firm's return on equity (ROE). An investment is acceptable if its AAR is less than the firm's return on assets (ROA).

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  1. 31 January, 17:07
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    An investment is acceptable if its AAR exceeds a target AAR.

    Explanation:

    The average accounting return (AAR) is a capital budgeting decisions method that is obtained by dividing the earnings after taxes and depreciation of an investment project by its average book value during its life.

    An arbitrary ARR target is usually set which compared with the calculated ARR.

    The decision rule under ARR is that an investment should be accepted if its AAR exceeds the target AAR.

    Therefore, The average accounting return (AAR) rule can be best stated as ann investment is acceptable if its AAR exceeds a target AAR.
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