Which One of the Following Best Illustrates the Problem Imposed

question 34

Multiple Choice

Which one of the following best illustrates the problem imposed by capital rationing?

• A) Accepting projects with the highest NPVs first
• B) Accepting projects with the highest IRRs first
• C) Bypassing projects that have positive NPVs
• D)Bypassing projects that have zero IRRs

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Definitions:

Economies of Scale

The economic benefits companies achieve through expanding their scale of activity, as the cost for every unit of output falls with the growth in scale.

Income

The financial earnings received by an individual or entity, typically measured over a certain period of time.

Utility-Maximizing

A principle in economics wherein individuals or entities make choices that result in the highest level of satisfaction.

R&D Expenditures

Money spent on research and development activities to innovate and improve products or processes.