The payback period and the accounting rate of return are two methods of evaluating capital budgeting decisions. Like other approaches, these two methods have advantages and disadvantages.
Required:
a. | What is an advantage of these two methods? |
b. | List two disadvantages of the payback period and explain how to calculate |
the payback period.
c. | List two advantages and two disadvantages of the accounting rate of return and |
explain how to calculate the return.