When a Firm Faces Hard Rationing

question 78

Multiple Choice

When a firm faces hard rationing,:

• A)all positive net present value projects will be accepted.
• B)each division within a firm will be allocated an amount for capital expenditures that will be less than the total value of its positive net present value projects.
• C)there will be no available funds for capital expenditures.
• D)the firm will fund only those projects that create value for its shareholders.
• E)the firm will finance only the projects that have the highest profitability index values.

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Definitions:

Floodplain

Land that is level or almost level, located next to a river or stream, which undergoes infrequent or regular floods.

Meander

A winding curve or bend in a river, which occurs as the river erodes the landscape in sinuous patterns.

Flood

The result of water overfilling a channel and spilling out onto the floodplain or other adjacent land.

Hydrographs

Charts that show the flow rate of water over time at a specific point in a river or stream.