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The Objective of Capital Rationing Is to Select the Group

question 93

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The objective of capital rationing is to select the group of projects that provides the highest overall net present value and does not require more dollars than are budgeted.


Definitions:

Marginal Probability

is the probability of an event occurring without considering other related events.

Coefficient of Correlation

The coefficient of correlation, also known as Pearson's r, measures the strength and direction of a linear relationship between two quantitative variables.

Marginal Probability

The probability of an event occurring in a probability distribution, regardless of the outcome of other variables.

Probability Distribution

A mathematical function that describes the likelihood of getting each possible value that a random variable can assume.

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