Capital Rationing OT Flashcards
1
Q
When choosing only one of four projects?
A
Only that one project
2
Q
if all four projects have positive NPV
A
Accept all four projects
3
Q
What is capital rationing?
A
Capital is finite, must find best way to allocate capital
4
Q
What is infinitely divisble?
A
Any fraction of a project
5
Q
Another name for NPV per $ invested?
A
Represents profitability index
6
Q
If there’s no where to invest the money
A
Give back to sharholders if it’s not needed.
7
Q
What is hard capital rationing?
A
Where lenders won’t lend us anymore
8
Q
What is soft capital rationing?
A
We can borrow more but we have limited the amount we are prepared to borrow
