Capital rationingthe availability of funds effects the, Ask an Expert

Finance

Capital Rationing

The availability of funds effects the capital budgeting decisions. The amount of funds available for capital expenditures will be either limited or unlimited. Funds would be considered unlimited when a firm is willing to acquire, through borrowing or equity, any amount of capital as long as the return on the investment is higher than the cost of the funds. When the funds that a firm will make available for capital investment are limited, and the firm has more opportunities for profitable investments than the limited funds can cover, the condition is described as capital rationing.

Your assignment is to focus on the following:

Describe how capital-budgeting decision criteria would be different in a capital-rationing situation than in a situation in which capital rationing was not necessary, and explain the reasons for the difference in criteria.
Describe the discounted-cash flow technique or techniques you would recommend in a capital-rationing situation and explain your reasons for your recommendation.

Write your response as a one-page memo.

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91390220
Price:- $10

Guranteed 24 Hours Delivery, In Price:- $10

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Assume the standard deviation of dell stock is 24 and the

Assume the standard deviation of Dell stock is .24 and the standard deviation of General Motors is .17. If you put 130% of your wealth in Dell and take a 30% short position in General Motors and the standard deviation of ...

A project has an initial cost of 30000 and will produce

A project has an initial cost of $30,000 and will produce cash inflows of 8000 per year for the next five years. In addition, the project will have a salvage value of $2000 at the end of its useful life. Find the net pre ...

Question - sns air is considering a new project the project

Question - SNS Air is considering a new project. The project will require $2,000,000 for new fixed assets. There is a total of $75,000 combined increase in inventories and account receivables which is partly financed by ...

Your firm spends 5200 every month on printing and mailing

Your firm spends $ 5,200 every month on printing and mailing? costs, sending statements to customers. If the interest rate is 0.52% per? month, what is the present value of eliminating this cost by sending the statements ...

Hope bonds have a coupon rate of 7 and mature in 7 years

Hope bonds have a coupon rate of 7% and mature in 7 years. Assuming semi-annual coupons with face value of $100, what is the value of this bond? Similar bonds yield 6%.

What is the standard hedge fund hf compensation structure

What is the standard hedge fund (HF) compensation structure and how do high watermark provision benefit or impose costs on HF investors?

A single person with a monthly taxable income of 2800 in

A single person with a monthly taxable income of $2800 in the 15% federal marginal bracket, has a state tax rate of 7.95% and social security taxes at 6.2%. This person forgoes consumption and instead places $230 into a ...

Piping hot food services is evaluating a project that costs

Piping Hot Food Services is evaluating a project that costs $75,000. The project is expected to generate after-tax cash flows equal to $26,000 per year for four years. Their required rate of return is 14%. What is the ne ...

1 what is the price of a semiannual 1000 par value bond

1) What is the price of a semiannual $1,000 par value bond with four years left until maturity that pays a coupon of 3.75% and is yielding 5.25%? What would it be yielding if the price decreased to $973.47? Assume semian ...

Fasb statement no 154 changed the requirements for

FASB Statement No. 154 changed the requirements for disclosures of accounting changes. Why could this be a concern to the analyst? a) The new disclosure rules cause the income statements to be inconsistent from year to y ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert