Kyle Electric has three positive net present value opportunities.Unfortunately,the firm has not been able to find financing for any of these projects.Which one of the following terms best describes the firm's situation?

Question

Quizplus · Accepted Answer

Capital rationing refers to a situation where a firm has opportunities to invest in positive net present value projects, but does not have enough financing to fund all of them. This is the exact situation described in the question. Sensitivity analysis refers to a technique used to determine how changes in one variable can impact the outcome of a project, and is not relevant in this case. Soft rationing refers to situations where a company internally limits funding to specific projects or departments, which is not applicable in this case. Contingency planning refers to preparing for unexpected events, and sunk cost refers to costs that have already been incurred and cannot be recovered, neither of which are relevant in this situation.

Kyle Electric Has Three Positive Net Present Value Opportunities