A ﬁrm which is faced with hard rationing:
A) Has more capital funds available than it has positive net present value projects and thus must decide what to do with the excess funds.
B) Allocates a ﬁxed amount of capital funds to each of its divisions on an annual basis.
C) Must decide how to allocate its limited capital funds among numerous positive net present value projects.
D) Must decide how to allocate its limited capital funds among various business units.
E) Has no capital funds available to ﬁnance a positive NPV project.

Question

Quizplus · Accepted Answer

Hard rationing occurs when a firm has no access to external capital and cannot finance any positive NPV projects due to a lack of available funds.

A ﬁRm Which Is Faced with Hard Rationing