If a Firm Is Subject to Capital Rationing,when Choosing a Set

question 77

Multiple Choice

If a firm is subject to capital rationing,when choosing a set of potential investments the firm should rank the projects by:

• A) NPV and choose the best ones until funding is exhausted.
• B) IRR and choose the best ones until funding is exhausted.
• C) PI and choose the best ones until funding is exhausted.
• D) ARR and choose the best ones until funding is exhausted.

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Definitions:

Fiscal Policy

Government policies regarding taxation and spending that are aimed at influencing economic conditions, including managing inflation, unemployment, and stimulating economic growth.

Federal Budget Deficit

The financial situation in which the government's expenditures exceed its revenues within a given fiscal year.

Trade Deficit

A situation where a country's imports exceed its exports, leading to more money leaving the country than entering it.

Interest Rates

The cost of borrowing money or the return on investment for savings and loans, expressed as a percentage.