Which One of the Following Statements Is Correct When a Firm

question 109

Multiple Choice

Which one of the following statements is correct 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)The firm does not have funds to finance any new projects.
• 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.

---

Definitions:

Collateral

The property or assets that a borrower offers to a lender as security for a loan.

Bankruptcy Code

The codified system of federal bankruptcy laws that governs the processes and procedures for declaring bankruptcy in the United States, providing legal frameworks for debt discharge and asset liquidation.

Reorganizations

The process of restructuring a company's business or legal structure, often for purposes of profitability, efficiency, or to adapt to new markets.

Chapter 11

A legal process involving reorganization of a debtor's business or assets under the U.S. bankruptcy laws.