Soft capital rationing may be beneficial to a firm if it:
A) reduces a firm's interest expense.
B) weeds out proposals with weaker or biased NPVs.
C) allows managers to select their favorite projects.
D) increases funds to be used for other purposes.

Question

Quizplus · Accepted Answer

Soft capital rationing allows a company to prioritize and only fund projects that have higher expected returns, while rejecting those with weaker or biased NPVs. This helps to ensure that the company is making the most profitable investment decisions, leading to higher overall profitability.

Soft Capital Rationing May Be Beneficial to a Firm If