Detailed Answer
Answer (A) is correct. The accounting, or book, rate of return is an unsatisfactory means of evaluating capital projects for two major reasons. Because the accounting rate of return uses accrual-basis numbers, the calculation is subject to such accounting judgments as how quickly to depreciate capitalized assets. Also, the accounting rate of return is an average of all of a firm’s capital projects; it reveals nothing about the performance of individual investment choices.