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Our firm has a capital rationing problem (more independent normal projects then money to fund them). Which of the following e
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Answer #1

Capital rationing is a situation where there is a constraint on the budget towards allocation of the funding for the investment in the projects.

In this situation, in case of independent projects, the order of priority of investment should be considered based on the Net Present Value of the Project. Selection of the projects should be done in descending order of their profitability till the budget exhausts based on each capital budgeting technique and generally the NPV approach is considered in these cases.

Answer: Only the Net Present Value

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