Answer (D) is correct . The accounting rate of return (also called the unadjusted rate of return or book value rate of return) measures investment performance by dividing the accounting net income by the average investment in the project. This method ignores the time value of money.
Answer (A) is incorrect because The bail-out payback method measures the length of the payback period when the periodic cash inflows are combined with the salvage value.
Answer (B) is incorrect because The internal rate of return method determines the rate at which the NPV is zero.
Answer (C) is incorrect because The profitability index is the ratio of the present value of future net cash inflows to the initial cash investment.
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