The objective of ________ is to select the group of projects that provides the highest overall net present value and does not require more dollars than are budgeted.

Question

Quizplus · Accepted Answer

Capital rationing is the process of limiting the amount of available capital to invest in different projects. The objective is to select the group of projects that provides the highest overall net present value, but also does not exceed the budgeted funds available. Therefore, option A is the most appropriate answer. Option B, scenario analysis, is a technique used to analyze the potential outcomes of different scenarios, whereas option C, certainty equivalents, is a method used to adjust risky cash flows to their equivalent certain values. Option D, sensitivity analysis, is a type of analysis that helps understand how changes in certain parameters or assumptions affect project outcomes.

The Objective of ________ Is to Select the Group of Projects