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What Are the Four Alternative Methods for Evaluating Capital Budgeting

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Essay

What are the four alternative methods for evaluating capital budgeting projects? What is an advantage and disadvantage of each method?


Definitions:

Notes Receivable

Financial claims against others that are documented by formal legal instruments indicating a right to receive payments.

Journal Entry

A record of the financial transactions in the accounting books of a business, showing the accounts and amounts debited and credited.

Net Realizable Value

The estimated selling price of inventory in the ordinary course of business minus any costs of completion, disposal, and transportation.

Allowance for Doubtful Accounts

This is a contra account that reduces accounts receivable to reflect the estimated amount of debts that may not be collected.

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