Soft capital rationing may be beneficial to a firm if it:
A) reduces a firm's taxes.
B) weeds out proposals with NPVs that have been overstated.
C) allows managers to select their favorite projects.
D) lowers the cost of capital.

Question

Quizplus · Accepted Answer

Soft capital rationing helps in identifying the projects with overstated NPVs, which can lead to better project evaluation and selection. This can result in a more efficient allocation of resources and better overall financial performance for the firm. Options (A), (C), and (D) are not necessarily true or relevant in the context of soft capital rationing.

Soft Capital Rationing May Be Beneficial to a Firm If