Uptown Promotions has three divisions.As part of the planning process,the CFO requested that each division submit its capital budgeting proposals for next year.These proposals represent positive net present value projects that fall within the long-range plans of the firm.The requests from the divisions are $4.2 million,$3.1 million,and $6.8 million,respectively.For the firm as a whole,the management of Uptown Promotions has limited spending to $10 million for new projects next year.This is an example of:
A)scenario analysis.
B)sensitivity analysis.
C)determining operating leverage.
D)soft rationing.
E)hard rationing.

Question

Quizplus · Accepted Answer

This is an example of soft rationing, where a company limits the funds for projects internally, despite the projects having positive net present values and fitting within the company's long-term plans.

Uptown Promotions Has Three Divisions