capital rationing is
Homework Answers
Capital rationing involves placing restrictions on the amount of investments undertaken by the company. These are placed by the top management to limit the new capital investments. It is way in which a limited budget is allocated among the most profitable investments.
Akron Transportation Service is operating under capital rationing, and expects to be in a capital rationing...
Akron Transportation Service is operating under capital rationing, and expects to be in a capital rationing environment for 3 years. The cost of capital is 10%. A $100,000 capital investment will provide cash flows of $30,000 at the end of each year for 5 years. Funds not used immediately can be invested until the end of the capital rationing period at a 20% annual return. Funds available at the end of the first year can be invested at 18% until...
Explain the reasons for capital rationing.
Explain the reasons for capital rationing.
Capital rationing could affect the returns to shareholders. An ethical dilemma is faced by the executives...
Capital rationing could affect the returns to shareholders. An ethical dilemma is faced by the executives of the business. Capital rationing could affect the stakeholders (other than the shareholder) of the business. Should capital constraints modify the principle of maximizing shareholder wealth? Requirements: 250 words
Write short notes on the following concepts Capitalization Capital market Capital market line Capital rationing Capital...
Write short notes on the following concepts Capitalization Capital market Capital market line Capital rationing Capital structure (f )Cash budget Payback rule Perpetuity Preferred stocks Primary issue Principle agent problem Profitability index Return on investments Re-purchase agreement Salvage value Secondary issue Secondary market
When do you use Profitability Index (PI) to evaluate projects? How? a. Under capital rationing; by...
When do you use Profitability Index (PI) to evaluate projects? How? a. Under capital rationing; by ranking projects from the highest PI to the lowest; b.For complementary projects; by ranking from the highest PI to the lowest; C.Under capital Rationing; by randomly choosing projects with any PI; d.For complementary projects; by randomly choosing projects with any PI;
Question 1010 pts Determining the optimal capital budget under the constraint of capital rationing generally means...
Question 1010 pts Determining the optimal capital budget under the constraint of capital rationing generally means we will not be able to finance all positive NPV project proposals (assuming the cost of all positive npv projects exceed the amount of financing) Group of answer choices True False
If projects are mutually exclusive a. they can only be accepted under capital rationing. b. the...
If projects are mutually exclusive a. they can only be accepted under capital rationing. b. the selection of one alternative precludes the selection of other alternatives. c. the payback method should be used. d. only the net present value method can be used.
Capital rationing NPV approach r with ฮ 13 7% cost of capital must sclect the opti...
Capital rationing NPV approach r with ฮ 13 7% cost of capital must sclect the opti al group of pro ccts from those shown in the follo na table gven its capital budget of $1 10 milion. NPV at 13.7% cost of capital 585,000 14,000 27,000 Projcct Initial investment 5300,000 400,000 100,000 900,000 400,000 100,000 900,000 1,000 2,000 163,000 a. Calulate the preent vaue o cash inncws aszociated with cach project The preeent value of cseh inows for project A...
Capital rationing-NPV approach A tirm with a 12.6% cost ot capital must select the optimal group...
Capital rationing-NPV approach A tirm with a 12.6% cost ot capital must select the optimal group ot projects trom those shown in the tollowing table, given its capital budget ot $1.10 million. NPV at 12.6% Project Initial investment cost of capital $88.000 $300,000 A 5,000 В 300,000 C. 100.000 17,000 D 900,000 95,000 E 500,000 72,000 F 200,000 53,000 155,000 800,000 a. Calculate the present value of cash inflows associated with each project. b. Select the optimal group of projects,...
QUESTION 1 The following information relates to three possible capital expenditure projects. Because of capital rationing,...
QUESTION 1 The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted. The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted. Project A Project B Project C Initial cost R400 000 R460 000 R360 000 Expected life 5 years 5 years 4 years Expected scrap value R20 000 R30 000 R16 000 Expected net cash inflows: R R R...
Capital rationing NPV approach r with ฮ 13 7% cost of capital must sclect the opti al group of pro ccts from those shown in the follo na table gven its capital budget of $1 10 milion. NPV at 13.7% cost of capital 585,000 14,000 27,000 Projcct Initial investment 5300,000 400,000 100,000 900,000 400,000 100,000 900,000 1,000 2,000 163,000 a. Calulate the preent vaue o cash inncws aszociated with cach project The preeent value of cseh inows for project A...
Capital rationing-NPV approach A tirm with a 12.6% cost ot capital must select the optimal group ot projects trom those shown in the tollowing table, given its capital budget ot $1.10 million. NPV at 12.6% Project Initial investment cost of capital $88.000 $300,000 A 5,000 В 300,000 C. 100.000 17,000 D 900,000 95,000 E 500,000 72,000 F 200,000 53,000 155,000 800,000 a. Calculate the present value of cash inflows associated with each project. b. Select the optimal group of projects,...
QUESTION 1 The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted. The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted. Project A Project B Project C Initial cost R400 000 R460 000 R360 000 Expected life 5 years 5 years 4 years Expected scrap value R20 000 R30 000 R16 000 Expected net cash inflows: R R R...
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