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Medical Science made easy
on Dec 01, 2024
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Capital rationing may:
A) require omitting projects with higher IRRs while undertaking some with lower IRRs because they fit into the budget constraint better.
B) be necessary because there is a budgetary limit on capital spending.
C) in practice be done intuitively for reasons that are not entirely financial.
D) All of the above
Budgetary Limit
The maximum amount of money allocated for a specific purpose in a budget.
IRRs
The Internal Rate of Return is the discount rate at which the net present value of all cash flows from a specific project is zero.
- Acquire knowledge on the concept and relevance of capital rationing in the selection of projects.
Verified Answer
NV
Learning Objectives
- Acquire knowledge on the concept and relevance of capital rationing in the selection of projects.