Calculate the Average Accounting Return (AAR) for the following investment and make one assessment of whether the company should make the investment. Comment on your results. The basic investment is SEK 600,000 and the economic life is estimated at 3 years. The investment is estimated to generate a turnover in year 1 of SEK 500,000, year 2 of SEK 450,000, and year 3 of NOK 350,000.

The production costs for the investment are estimated for year 1 to be SEK 200,000, year 2 for SEK 150,000 and year 3 of SEK 100,000. The administrative costs for year 1 are estimated to be SEK 50,000, year 2 for SEK 50,000 and year 3 of SEK 20,000. The corporate tax is 22% and the company assumes that an investment must have an AAR of at least 10% to be considered profitable.

Discuss the advantages and disadvantages of AAR as a method of investment