Reasons for More Use of Payback and AAR

accounting

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Reasons for More Use of Payback and AAR


There is a different technique for reaching a conclusion for the investment decision under

the capital budgeting. The most use method is the payback method and ARR as there are several

benefits of it. However, the much accurate method use the time value of the money that has

ignored by these two approaches. And hence the most reliable means for the investment decision

is the NPV and IRR method (Gitman, Juchau, & Flanagan, 2015) . This paper will discuss the

reasons that payback and AAR are used more than the IRR and NPV by the financial investors.

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