When a company faces capital rationing, which of the following is the most appropriate decision rule for selecting projects to maximize shareholder wealth?
Question 2
A company has a capital budget of $$ \$100,000 $. It is considering three independent projects: Project A requires $ \$40,000 $ and has a Profitability Index (PI) of $ 1.4 $. Project B requires $ \$50,000 $ and has a PI of $ 1.3 $. Project C requires $ \$30,000 $ and has a PI of $ 1.5 $$. Which combination of projects should the company select to maximize value within its budget?
Question 3
What is the primary distinction between 'hard capital rationing' and 'soft capital rationing'?
Question 4
A project requires an initial investment of $$ \$80,000 $ and has a Net Present Value (NPV) of $ \$20,000 $$. What is its Profitability Index (PI)?
Question 5
In the context of capital rationing, what is the main advantage of using integer programming over simpler methods like ranking by Profitability Index (PI) for project selection?
Capital Rationing Quiz — Corporate Finance | A-Warded
