Question 1
AARR indicates the average rate at which ________.
◦ a dollar of investment generates after-tax operating income
◦ a dollar of after-tax cash flow generates net income
◦ a dollar of investment generates a positive cash flow
◦ a dollar of after-tax non-operating income generates net income
Question 2
Accrual accounting rate of return is calculated by dividing ________.
◦ net initial investment by an increase in expected average annual after-tax operating income
◦ an increase in expected average annual after-tax operating income by the net initial investment
◦ an increase in expected average annual cash flow by the net initial investment
◦ net initial investment by an increase in expected average annual cash flow