When a Firm Cannot Invest in Every Positive NPV Project

question 18

Multiple Choice

When a firm cannot invest in every positive NPV project because of limited funds,this is known as:

• A) capital budgeting.
• B) capital investing.
• C) capital rationing.
• D) capital financing.

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Definitions:

Fiscal Year-end

The end of a 12-month period used by governments and businesses for accounting and financial reporting purposes.

Par Value

The face value of a bond or stock as stated by the issuing company, which bears no correlation to its market value.

Bond Interest Expense

The amount of interest a company must pay periodically to holders of its bonds, as per the interest rate specified in the bond agreement.

Bond Liability

An obligation or debt issued by a company, promising to repay the principal amount along with interest to bondholders at a specified future date.