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from class: Managerial Accounting Definition Alternatives are different courses of action or investment options considered in capital budgeting decisions. They help managers evaluate and choose the best option to maximize returns and meet strategic goals.
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Predict what's on your test 5 Must Know Facts For Your Next Test Alternatives must be evaluated using financial metrics like Net Present Value (NPV) and Internal Rate of Return (IRR). Identifying viable alternatives is the first step in capital budgeting. Each alternative involves a unique set of cash flows, risks, and benefits. Managers often use sensitivity analysis to compare how different variables affect the outcomes of alternatives. Selecting the best alternative requires considering both quantitative and qualitative factors. Review Questions What financial metrics are commonly used to evaluate alternatives? Why is it important to identify multiple alternatives in capital budgeting? How does sensitivity analysis help in comparing different alternatives?
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