Which of the Following Is True Regarding Capital Rationing Decisions

question 70

Multiple Choice

Which of the following is true regarding capital rationing decisions for capital assets?

• A) Companies should always choose the investment with the shortest payback period.
• B) Companies should always choose the investment with the highest NPV.
• C) Companies should always choose the investment with the highest ARR.
• D) Companies may have to choose a subset of available capital investments.

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Definitions:

Artificially Scarce Good

A good that is excludable but nonrival in consumption.

Pay-Per-View

A type of television or internet broadcasting service by which a user pays to view a specific television program or event.

Artificially Scarce

A situation where the supply of a good is limited by factors other than its physical scarcity, often due to regulatory or monopolistic practices.

Excludable

Referring to a good, describes the case in which the supplier can prevent those who do not pay from consuming the good.