If a division of a firm faces soft rationing, it is unlikely more capital can be obtained from the firm if the division finds a worthwhile positive NPV project.

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Soft rationing occurs when a division is limited in the amount of funds it can receive from the parent company, not because the company lacks funds, but due to internal policy decisions. If a division finds a worthwhile positive NPV project, it can often make a case for obtaining more capital, especially if the project aligns with the firm's strategic goals and has a clear, positive financial outlook.

If a Division of a Firm Faces Soft Rationing, It